Oil sector dominates Illicit Financial Flows as FG loses $18bn annually

0

Chibisi Ohakah

 

Nigeria Extractive Industries Transparency Initiative (NEITI) has stunned economic observers with the report that the country loses between $15 and $18 billion every year to Illicit Financial Flows [IFFs], of which it said the oil and gas sector in Nigeria drives by over 92.9%. These flows, according to the report, are recorded yearly through companies and persons operating in the sector.

 

Titled, “Averting Illicit Financial Flows in Nigeria’s Extractive Industry”, which was presented in Abuja yesterday, stated that while it is generally difficult to measure IFFs as a result of their illegality, types of activities, and data challenges, available records show that Nigeria’s oil and gas sector contributes the most to the illegality.

Of the 92.9% contribution from the oil and gas sector, oil bunkering was pointed as claiming about 35 %, while commercial transactions conducted illicitly by players international companies who dominate the sector contribute more than 60%, the NEITI report said

Expectedly, tax evasion, non remittances, money laundering, and transfer pricing in their practice of IFFs, were indicated as the popular routes the flows were executed, and this is attributable to Nigeria’s oil industry vulnerability to the thriving practice of IFFs.

The report also said the IFFs have continued to thrive because Nigeria depends so much on oil to drive the economy, whereas the sector is equally highly influenced and controlled by the political class. In addition, the technically and structurally complex nature of oil transactions, and Nigeria’s reliance on cash-based economy, was given as added reason why IFFs thrive in Nigeria

The IFFs report on Nigeria’s extractive sectors stated that Nigeria accounted for 30.5 per cent of all IFFs outflows from Africa, which is $217.7 billion, between 1970 and 2008. It stated that opportunities for IFFs through fraud and money laundering in Nigeria’s oil industry generally starts as administrative control failures by those expected to exercise statutory and regulatory frameworks in the industry.

The failure of statutory and regulatory frameworks, the report said, has resulted to high politicisation of discretionary powers, inadequate corporate governance, regulatory capture, political interference, conflict of interests, tax evasion and bribery.

To check the high incidence of the IFFs in Nigeria, NEITI said the authorizes must mitigate the risks of criminal activities, increase scrutiny and accountability of processes, promote effective demand-side accountability platforms, and get signed on to channels and platforms that discourage trading in illegally exploited minerals. The country must also try to enforce laws and taxation instruments, as well as automate service delivery processes.

NEITI executive secretary, NEITI, Mr. Waziri Adio, said that the worrisome level of IFFs in Nigeria meant the country needed to move from asking how much it was paid or not, to how the payments are made to it. “Everybody is talking about illicit financial flow. It is one of the buzzwords now, and there are all kinds of reports out there about how countries are bleeding from this.

“There is a report published by One Campaign in 2014 about how developing countries lose about $1 trillion annually from this, and you can imagine what that would do for these countries. But, it is not just about talking about these studies and the figures but how these illicit flows are actually depriving countries of their resources.

“Some of these reports have also focused on Nigeria and when you look at the latest estimate from the Thabo Mbeki-led HLP, Africa loses about $50 to $60 billion every year to IFFs and it is estimated that Nigeria accounts for 30 per cent of that loss, that means Nigeria is losing between $15 to $18 billion every year to IFFs and that is not a small amount of money,” he said

Leave A Reply

Your email address will not be published.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More