$17.8 bn illegally taken out of Nigeria in 9 years – Report

Dollars used to illustrate the story.

Over $7.8 trillion was siphoned from the world’s developing and emerging economies between 2004 and 2013, and over $17.8 billion (about N3.4 trillion) of that amount, was from Nigeria, a new report on global illicit financial flows has said.

Nigeria is among the world’s top 20 countries with the biggest losses from skewed financial transactions, the report noted.

South Africa leads the pack in Africa with $209.22 billion lost over the period. It occupies the seventh position on global ranking.

Globally, China leads with $1.39trillion, followed by Russia ($1.05trillion), Mexico ($528.44billion), India ($510.29billion), Malaysia ($418.54billion) and Brazil ($226.67billion), Thailand ($191.77billion) and Indonesia $180.71billion.

Others include Kazakhstan ($167.40billion), Turkey ($154.50billion), Venezuela ($123.94billion), Ukraine ($116.76billion), Costa Rica ($113.46bilion), Iraq ($105.01billion), Azerbaijan ($95.00billion), Vietnam ($92.94billion), Philippines ($90.25billion) and Poland ($90.02billion).

Illicit financial flows are transactions involving the transfer of the proceeds from the exploitation of the resources from a particular region to another, either through money laundering and other illegal means, or commercial activities, without the commensurate value in returns.

The report published on Wednesday by Global Financial Integrity, GFI, a Washington DC-based research and advisory group, said illicit financial flows from developing and emerging economies, which stood at just $465.3 billion in 2004, rose sharply to $1.1 trillion in 2013 alone.

Titled “Illicit Financial Flows from Developing Countries: 2004-2013″, the report, which described the phenomenal jump in scale, showed that illicit financial flows first exceeded the $1 trillion mark in 2011.

Authored by GFI’s chief economist, Dev Kar, in partnership with his junior counterpart, Joseph Spanjers, the report ranked Nigeria 10th among the world’s top 20 countries devastated by illicit financial flows.

The study involved the analysis of discrepancies in balance of payments data and direction of trade statistics (DOTS), as reported to the IMF to detect flows of capital illegally earned, transferred, and/or utilized.

Detailed findings from the report showed that illicit financial flows growth rate for the period averaged 8.6 percent in Asia and 7 percent in developing Europe as well as in the MENA and Asia-Pacific regions.

The report identified Sub-Saharan Africa as the only region still suffering the biggest blow from the negative impact from illicit financial outflows, with an average of 6.1 percent of its gross domestic product, GDP finding their way out to other regions without returning.

About 5.9 percent of the GDP of developing economies in Europe was equally affected, according to the report, while the impact on the developing countries’ GDP averaged a staggering four percent and 3.8 percent of the GDP of Asia.

The report also said about 3.6 percent of the entire value of the economic activities of countries in the Western Hemisphere was lost through illicit financial transactions, same as the Middle East, North Africa, Afghanistan, and Pakistan, which accounts for about 2.3 percent.

Other findings from the report showed that trade fraud accounted for $6.5 trillion of the illicit outflows, with China, Russia, Mexico, India, and Malaysia, as the biggest exporters of illicit capital over the period.

In seven of the10 years studied, the report showed that global illicit financial flows outpaced the total value of all foreign aid and foreign direct investment flowing into poor nations.

“This study clearly demonstrates that illicit financial flows are the most damaging economic problem faced by the world’s developing and emerging economies,” GFI President Raymond Baker, said.

The GFI president said the report confirmed the concerns at the 2015 United Nations Assembly that for Sustainable Development Goals to be achieved, it would require significant curtailing of the illicit flows to meet the mantra of ‘trillions not billions’ needed to fund the campaign.

This was in line with the objective of Goal 16.4 of the Sustainable Development Goals (SDGs), which calls on countries to significantly reduce illicit financial flows by 2030.

Although the report observed that the international community was yet to agree on the goal indicators, it said however that the technical measurements have been identified to provide baselines and track progress made on underlying targets and, subsequently, the overall SDGs.

These indicators, the report explained, would not be finalized until March 2016. But, it called on the International Monetary Fund, IMF, to conduct the annual assessment.

The report urged world leaders to focus on promoting openness in the global financial system, particularly by establishing public registries of verified beneficial ownership information on all legal entities, while all banks should know the true identities of owner(s) accounts opened with them.

“Government authorities should adopt and fully implement all of the Financial Action Task Force’s (FATF) anti-money laundering recommendations; laws already in place should be strongly enforced,” the report recommended.

Besides, it asked policymakers to demand multinational companies to publicly disclose their revenues, profits, losses, sales, taxes paid, subsidiaries, and staff levels on a country-by-country basis.

In addition, it said all countries should actively participate in the worldwide movement towards the automatic exchange of tax information as endorsed by the Organisation of Economic Cooperation and Development, OECD, and the G20.

Other policy recommendations included the need for Customs agencies to treat trade transactions involving a tax haven with the highest level of scrutiny, while governments should significantly boost their customs enforcement by equipping and training officers to better detect intentional misinvoicing of trade transactions, particularly through access to real-time world market pricing information at a detailed commodity level.

It also emphasized the need for governments to sign on to the Addis Ababa Tax Initiative to further support efforts to curb illicit financial flows as a key component of the development agenda.

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