In almost two decades, an estimated $89 billion, equivalent to 18.69 percent of Nigeria’s GDP, left the country as illicit capital flight, according to UNCTAD’s Economic Development in Africa Report 2020.
The proceeds from oil export misinvoicing at $44 billion and $45billion from import misinvoicing between 1996 and 2014 contribute to an average of $4.94billion per year of capital flight from Nigeria, which is wealth sent and held abroad.
Out of the 11 African countries reviewed by the UN’s trade and development body, Nigeria is only better than South Africa ($198 billion) in terms of the value of illegal capital flight. The capital flight ($89 billion) from Africa’s largest economy is higher than that of Ghana ($20.6 billion) and Egypt ($32.6 billion) put together ($53.2 billion).
“Like the concept of migration, illicit financial flows have countries of origin and destination, and there are several transit locations,” President Muhammadu Buhari was quoted to have said.
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According to the president of the most populous nation in Africa, the “fact remains that the funds involved often come from jurisdictions with scarce resources for development financing, depleted foreign reserves, a drastic reduction in collectable revenue, tax underpayment or evasion and poor investment in-flows.”
Analysis of the 2020 report by UNCTAD shows that Nigeria accounts for an estimated 46 percent of the capital flight on the continent, based on average estimates for 2013–2015, and 80 percent of the capital flight in Western Africa.
Nigeria’s annual estimated capital flight of $4.94 billion in the review period is 48.35 percent higher than the $3.33 billion reported for Angola (total of $60 billion), Africa’s largest crude producer after Nigeria.
The UN’s trade and development body believes that capital flight is a significant problem in Nigeria. Despite some reduction, mainly due to declining oil prices, estimated capital flight peaked at $45.5 billion, or roughly $264 per capita in 2015.
According to the report capital formation in Nigeria fell continuously, from 34 percent of GDP to 15 percent of GDP in 2015 and Government revenue declined from 27.6 percent of GDP to 7.6 percent of GDP. This trend presents a challenge in promoting structural transformation, economic diversification and social development and in reducing poverty and inequalities. “Capital flight may be negatively associated with economic growth in the long term.”
Explaining that stolen assets are the proceeds of corruption and countries in Africa face significant legal and practical constraints in dealing with stolen assets and reclaiming them, Nigeria is among the most active countries in recovering stolen assets and engaging with multilateral stakeholders.
Practical steps taken by the Government to address illicit finance flight include the signing of bilateral agreements with Switzerland, the United Arab Emirates, the United Kingdom and the United States for the return of stolen assets, with the expectation that such bilateral agreements will act as a disincentive to the sending of illicit funds from Nigeria to these countries.
“The outcomes will depend in part on how the agreements are enforced and whether they dissuade corrupt practices,” Mukhisa Kituyi Secretary-General of the UNCTD said.
Most recently, the Nigerian government announced that it will reclaim $311 million in misappropriated funds, as part of an agreement with the United States and Jersey. This is aside from the identified $9.8 billion owed to the Government, of which $2.4 billion is said to have been recovered through the efforts of the extractive industry transparency initiative.
According to the Secretary-General of the UNCTD illicit flows rob Africa and its people of their prospects, undermining transparency and accountability and eroding trust in African institutions.
“Illicit financial flows and corruption are inhibiting African development by draining foreign exchange, reducing domestic resources, stifling trade and macroeconomic stability and worsening poverty and inequality.”
Acknowledging the fact that the ability for African countries to tackle illicit financial flows will open the door to releasing much-needed investments in education, health and productive sectors, the report advised that African Governments – in concert with Africa’s private sector actors – should take the lead in strengthening stolen asset recovery, setting new standards for avoiding illicit flows and committing to more concerted actions to combat the negative impact of illicit financial flows on African economies.
