Budget cuts caused by COVID-19-motivated economic downturns are posing a threat to Nigeria’s ability to curb Illicit Financial Flows (IFF) which a report says cost the country about $15.7 billion annually.
The Economic and Financial Crimes Commission (EFCC), which is the government’s flagship anti-corruption agency with the most versatile mandates to fight IFF and other enabling crimes, enters 2021 with a cut from the N32.7 billion ($86.3million) allocated to it in 2020.
The 2021 national budget newly signed into law by President Muhammadu Buhari shows that N29.6 billion ($78.5million) is allocated to the agency in 2021, translating into a cut of as much as N3.1billion ($7.8million) from its 2020 allocation.
Meanwhile, a recent case of how Freiherr Fedrick Von Hahn, a German, was duped of €880,000 with part of the proceeds illicitly making its way to Nigeria and further disbursed to foreign collaborators between April and May 2020, highlights the need for the country to step up its fight against IFF during the pandemic.
Mr Von Hahn, who had struck a deal with a Dutch pharmaceutical company, ILBA Holding BV, for the supply of 11 million COVID facemasks meant for the state of North Rhine-Wesphalia in Germany, was swindled through a cloned e-mail in a transborder money laundering scheme perpetrated in Germany, the Netherlands and Nigeria.
While two Dutch collaborators have since been convicted in their country, the ongoing prosecution of Nigerian suspects by the Federal Ministry of Justice may be negatively impacted by the cut of about N2.99 billion ($7.9million) from the N32 billion ($84.5million) allocated to it in the 2020 budget.
Speaking on the possible impact of budget costs on the anti-graft war, Oluwaleke Atolagbe, who is a member of a team of EFCC’s external prosecutors, said, “When money laundering activities are across borders, we know for instance that investigating bodies would have to work with sister agencies in other jurisdictions and even the governments of such countries”.
“The officers of the investigating agencies would require training and retraining; they would need to travel to and from different countries and all these would require funds,” the lawyer added.
He expressed concerns that “Already, there is the concern that investigations are underfunded in Nigeria”, adding, “If there is a budget cut, we should therefore expect poorer performance in the fight against transborder money laundering and illicit financial flows”.
The immediate-past Director of the Nigeria Financial Intelligence Unit (NFIU), Francis Usani, said poor allocation of funds to anti-corruption agencies like the EFCC at a time it ought to be given more would negatively impact its capacity to curb IFF.
He said, “EFCC has the mandates to fight all the crimes that aid illicit financial flows – from tax evasion, oil bunkering, money laundering, to the rest of them.
“But if you don’t allocate enough resources to them, how do you expect them to fight?”
Mr Usani said budget cut could undermine inter-agency cooperation as various agencies might have to channel limited resources to addressing their individual projects.
He added, “The cooperation between the Federal Inland Revenue Service and the EFCC resulted into the EFCC establishing a unit called Tax Fraud Unit.
“If the unit does not have tools to run its operations because of lack of funds, it will affect their productivity.”
Also, Sadiq Radda, who is the Executive Secretary of the Presidential Advisory Council Against Corruption, a body of President Buhari’s top anti-corruption advisers, said although “the budgetary allocation for all ministries, departments and agencies has been cut by certain percentage”, government should “consider fighting corruption as a source of revenue” to appreciate the need to allocate more funds to the institutions fighting revenue leakages.
The Global Financial Integrity (GFI), a United States of America-based research and advocacy group, stated in a 2014 report that IFF, which the World Bank describes as “money illegally earned, transferred, or used that crosses borders”, bled Nigeria for as much as $157.5billion in revenue between 2003 and 2012.
Citing the GFI report, President Buhari said in New York in September 2019 that the lost money estimated in the report to be about $15.7billion annually could have been used “to fund public services or to alleviate poverty”.
Meanwhile, the National Bureau of Statistics (NBS) said in a 2020 report on poverty and inequality in Nigeria that about 40 per cent of the people of the most populous African nation are below poverty line.
More Nigerians may fall below the poverty line in the nearest future, as the economy, in November 2020, slumped back to its worst recession in years due to factors attributable to COVID-19, and pushed the Federal Government to put forward a 2021 budget of N13.58 trillion ($34 billion) with a wide revenue deficit of about N5.2 trillion ($13.6 billion).
Meanwhile, the estimated $15.7 billion lost annually to IFF is more than enough to cater for the $13.6 billion budgetary deficit and address social needs that can take more Nigerians out of poverty.
Why fight against IFF must be strengthened
Human rights lawyer and Chairman of Alliance on Surviving COVID-19 and Beyond, Femi Falana, said with a likely protracted recession staring Nigeria in the face, many anti-corruption agencies may suffer budget cut for a long period of time despite the need for government to step up the capacities of the agencies to curb IFF.
The Executive Director, Civil Society Legislative Advocacy Centre, Auwal Musa, whose organisation in 2019 issued a report on real estate-associated money laundering, said, “The cut in the budget of some anti-corruption agencies, which were not even getting half of what they required to do their work, shows lack of seriousness in terms of the fight against corruption”.
Funding fight against IFF is source of revenue
Mr Radda advised government to allocate more funds to the anti-corruption agencies despite the COVID-19 constraints.
The professor of criminology added, “An effective fight against corruption will make sure that all leakages are blocked.
“So, it ensures that the government’s revenue is not leaked and the revenue stays with the government.”
Speaking in the same vein, the Executive Director of Human and Development Agenda, Olanrewaju Suraju, said “tracing and recovery of illicit assets is always a worthy and even profitable investment for the state”.
The former NFIU director, Mr Usani, who said “Nigeria is still rated as the highest contributor to illicit financial flow in Africa”, added that “if the government sees that as a major problem, it has to allocate resources to address it”.
Well-funded fight against IFF can help to end terrorism
Mr Usani said if well-funded, agencies fighting to curb IFF could help to find a lasting solution to the terrorism being perpetrated in the North-East of the country for last 10 years.
“We can enhance the capacities of these agencies fighting illicit financial flows to be able to stop the source of funding of Boko Haram,” he said.
(This story was produced by PREMIUM TIMES. It was written as part of Wealth of Nations, a media skills development programme run by the Thomson Reuters Foundation. More information at www.wealth-of-nations.org. The content is the sole responsibility of the author and the publisher).
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