Commercial Activities Are 65 Per Cent Of $18bn Annual Illicit Financial Flow From Nigeria — Minister of Finance

Minister of Finance, Budget and National Planning, Mrs Zainab
Ahmed, has declared that commercial activities are responsible for
65 per cent of the estimated $18 billion annual illicit financial
flow from Nigeria.

At a virtual International Conference on Illicit Financial Flows
(IFFs) & Asset Recovery held virtually, on Tuesday, Ahmed said the
effects are being especially felt given the ongoing COVID-19
pandemic and the resultant deepening of fiscal constraints and
public financing gaps.

It is estimated that Nigeria loses between $15 billion and $18
billion to illicit financial flow annually.

It was also ranked 14th most vulnerable country out of 125 in
the 2020 Basel Anti-Money Laundering Index in addition to emerging
146 of 180 on the 2020 Corruption Perception Index of Transparency
International.

Addressing the meeting, the Minister warned that if not checked,
illicit financial flows will continue to significantly erode
domestic revenues, enable corruption, threaten economic stability
and sustainable development, divert money from public priorities
and hamper Government’s efforts to mobilise domestic resources and
recover better.

“Commercial activities like aggressive tax avoidance and tax
evasion, through trade mispricing, abusive transfer pricing, profit
shifting and tax arbitraging account for approximately 65 per cent
of illicit financial flows across Africa.

In Nigeria and across the African continent, we continue to
suffer various forms of IFFs, including tax evasion and other
harmful tax practices, the illegal export of foreign exchange,
abusive transfer pricing, trade mispricing, misinvoicing of
services, illegal exploitation and under-invoicing of natural
resources, organised crimes, and corruption.

“The resulting domestic revenue losses are significant, putting
developing countries and the entire African region at risk of not
achieving sustainable and inclusive development, especially in the
wake of the coronavirus pandemic.

“Furthermore, we in Africa often find ourselves in a “race to
the bottom” to attract foreign direct investments (FDIs), as a
result of the current international tax practices and treaties.

According to her, commercial tax evasion and other types of IFFs
inevitably impact the allocation of already limited government
funds, with a disproportionate impact on public services benefiting
women and youth. Consequently, curbing IFFS can lead to
improvements in environmental, social, and economic development in
Africa.

“As one of the most affected countries, Nigeria has demonstrated
a strong commitment to addressing illicit financial flows through
our participation in the Open Government Partnership and the
significant progress made in the extractive industry.

She highlighted some of the steps taken to curb the scourge.

The Minister disclosed that eradication of the scourge requires
sustained cooperation between Africa and multilateral
organisations.

“We encourage the international community to explore and develop
specific and targeted measures, including mutual legal assistance,
to address barriers to international cooperation on this important
matter” and that “Africa must have a seat at the table and be well
represented ”during negotiations about illicit funds and their
proceeds.”

“It is also critical that countries that are the main
destination for illicit financial flows and their proceeds take
urgent steps to assist in combating this scourge, preventing the
inflow of illicit funds, freezing or seizing assets already in the
country, and by ensuring that illicit funds and any proceeds are
repatriated,” she suggested.

She explained that Nigeria has taken proactive steps towards the
recovery of previously stolen assets, in part through engagement
with multilateral stakeholders.

Minister of Finance, Budget and National Planning, Mrs Zainab
Ahmed, has declared that commercial activities are responsible for
65 per cent of the estimated $18 billion annual illicit financial
flow from Nigeria.

At a virtual International Conference on Illicit Financial Flows
(IFFs) & Asset Recovery held virtually, on Tuesday, Ahmed said the
effects are being especially felt given the ongoing COVID-19
pandemic and the resultant deepening of fiscal constraints and
public financing gaps.

It is estimated that Nigeria loses between $15 billion and $18
billion to illicit financial flow annually.

It was also ranked 14th most vulnerable country out of 125 in
the 2020 Basel Anti-Money Laundering Index in addition to emerging
146 of 180 on the 2020 Corruption Perception Index of Transparency
International.

Addressing the meeting, the Minister warned that if not checked,
illicit financial flows will continue to significantly erode
domestic revenues, enable corruption, threaten economic stability
and sustainable development, divert money from public priorities
and hamper Government’s efforts to mobilise domestic resources and
recover better.

“Commercial activities like aggressive tax avoidance and tax
evasion, through trade mispricing, abusive transfer pricing, profit
shifting and tax arbitraging account for approximately 65 per cent
of illicit financial flows across Africa.

In Nigeria and across the African continent, we continue to
suffer various forms of IFFs, including tax evasion and other
harmful tax practices, the illegal export of foreign exchange,
abusive transfer pricing, trade mispricing, misinvoicing of
services, illegal exploitation and under-invoicing of natural
resources, organised crimes, and corruption.

“The resulting domestic revenue losses are significant, putting
developing countries and the entire African region at risk of not
achieving sustainable and inclusive development, especially in the
wake of the coronavirus pandemic.

“Furthermore, we in Africa often find ourselves in a “race to
the bottom” to attract foreign direct investments (FDIs), as a
result of the current international tax practices and treaties.

According to her, commercial tax evasion and other types of IFFs
inevitably impact the allocation of already limited government
funds, with a disproportionate impact on public services benefiting
women and youth. Consequently, curbing IFFS can lead to
improvements in environmental, social, and economic development in
Africa.

“As one of the most affected countries, Nigeria has demonstrated
a strong commitment to addressing illicit financial flows through
our participation in the Open Government Partnership and the
significant progress made in the extractive industry.

She highlighted some of the steps taken to curb the scourge.

The Minister disclosed that eradication of the scourge requires
sustained cooperation between Africa and multilateral
organisations.

“We encourage the international community to explore and develop
specific and targeted measures, including mutual legal assistance,
to address barriers to international cooperation on this important
matter” and that “Africa must have a seat at the table and be well
represented ”during negotiations about illicit funds and their
proceeds.”

“It is also critical that countries that are the main
destination for illicit financial flows and their proceeds take
urgent steps to assist in combating this scourge, preventing the
inflow of illicit funds, freezing or seizing assets already in the
country, and by ensuring that illicit funds and any proceeds are
repatriated,” she suggested.

She explained that Nigeria has taken proactive steps towards the
recovery of previously stolen assets, in part through engagement
with multilateral stakeholders.