• Friday, April 19, 2024
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BusinessDay

Fraud and corruption as pillars of Nigeria’s economic ecosystem

How Dangote and Air Peace rose up against the economic strangulation of Nigeria

John, an employee of a real estate company, navigated life with a salary that once allowed him a comfortable one-bedroom apartment in the city of Lagos. However, as the economy was gripped by high inflation, John found himself facing financial challenges. His salary remained stagnant despite the mounting costs of living, and to make matters worse, his landlord doubled the rent from four hundred thousand naira to an unaffordable sum.

Devastated, John received a quit notice, compelling him to leave the apartment. The vacant property was quickly snapped up by another tenant involved in internet fraud, commonly known as “Yahoo Yahoo.” The news spread like wildfire, prompting other landlords in the vicinity to hike rents at their respective properties.

The influx of “yahoo boys” willing to pay exorbitant amounts forced many, like John, to relocate to other places they could afford. The area transformed into a thriving hub for “Yahoo boys,” and the landlords, aware of the criminality, turned a blind eye as long as their profits soared. The economic ecosystem of the neighbourhood shifted, revealing a disturbing symbiosis between legitimate businesses and illicit gains.

John, a real estate company employee, was unaware of the company’s involvement in money laundering for corrupt politicians and internet fraudsters in Dubai. The chairman’s arrest exposed the company’s involvement, leaving John embarrassed. The company had been remitting John’s income tax to the state tax agency and VAT on properties sold to the federal tax agency, indirectly contributing to corruption. This story highlights how corruption can infiltrate every societal layer, impacting individuals like John unknowingly.

Q: “The challenge lies in the far-reaching impact on the economy, with dirty money infiltrating nightlife businesses, financial institutions, hospitality, entertainment, real estate, religion, and NGOs.”

The insidious intertwining of fraud and corruption has created a complex economic ecosystem where illicit funds flow seamlessly through various sectors, leaving an indelible mark on the nation’s financial landscape. The challenge lies in the far-reaching impact on the economy, with dirty money infiltrating nightlife businesses, financial institutions, hospitality, entertainment, real estate, religion, and NGOs.

The roots of corruption:

Nigeria’s societal fabric is deeply rooted in criminal activities like internet fraud and drug trafficking. The ‘yahoo-yahoo’ culture has become a perceived escape from poverty and unemployment. Politicians embezzle public funds as a self-rewarding strategy, collaborating with business owners to conceal their gains. Some illicit funds end up with the Apex Tax Authority disguised as taxes, perpetuating fraud and corruption.

Media manipulation:

The key drivers of this fraudulent ecosystem have strategically invested in the media, especially the new media, shaping an image of crime as a “hustle”—a m means for breaking the chains of poverty. This media manipulation serves to launder the image of those involved in criminal activities, portraying them as enterprising individuals rather than criminals.

Corrupt politicians use financial war chests to establish media teams to shape narratives in their favour. These influential teams are often recruited from established media houses, highlighting talent poaching within the industry. This strategic investment perpetuates corruption and highlights the intersection of political power and media manipulation.

The complex “Value Chain” of corruption:

A complex value chain has emerged within this fraudulent ecosystem, providing employment to many unaware individuals. Even those who do not actively support criminal activities find themselves employed in shell companies, unknowingly contributing to the laundering of illicit funds.

The dynamics:

In Lagos, Nigeria, the real estate sector serves as a revealing barometer of how money laundering influences property sales. Even though a high percentage of the population struggles with annual rent, the real estate business model, when compared to average incomes, suggests the existence of illicit wealth concealed behind luxury properties.

Real estate and hospitality businesses in slum communities often project revenues from patronage from criminals, leading to overpaying for goods and services. Many individuals with questionable wealth run these businesses, often with close ties to corrupt politicians, leveraging their businesses for money laundering.

High-profile convictions:

Notable cases, such as that of Scales Olatunji, convicted for defrauding the Norwegian government, underscore how criminals hide their illicit gains through the acquisition of opulent properties. Corrupt politicians and internet fraudsters alike have faced convictions, with their ill-gotten properties confiscated.

Impact on society:

The rise in internet fraud has contributed to increased street violence and cultism. Wire fraud and Business Email Compromise (BEC) activities fund street cultism, perpetuating violence within society. Shockingly, fraud has become so normalised that some view it as a preferable alternative to more violent crimes.

How internet fraud fuel cultism and street gang activities:

Internet fraud, commonly associated with schemes like phishing and online scams, has inadvertently become a catalyst for cultism and street gang activities in Nigeria. The perpetrators of internet fraud, also known as “yahoo boys,” frequently employ intermediaries, referred to as “pickers,” to collect money from their victims.

Pickers in Nigeria act as middlemen, facilitating the transfer of fraudulent funds by providing recipient bank information. They take a percentage and remit the rest to the masterminds. However, these fraudsters often funnel funds to local cult groups and street gang members in Lagos, aiming to enforce remittances from pickers who might deceive them. This leads to violence against pickers who divert funds instead of remitting them, causing a rise in violence on Nigeria’s inner streets, particularly in Lagos.

The path forward:

Fighting fraud and corruption in Nigeria requires a holistic approach. Addressing both the acquisition of illicit wealth and the exchange of illicit funds for products and services is essential. While the government pursues those amassing illicit wealth, closing the loopholes that allow for easy spending of stolen funds is equally crucial.

The fight against fraud and corruption in Nigeria demands a collective effort to dismantle the intricate economic ecosystem that sustains these criminal activities. It necessitates a simultaneous focus on both the roots of corruption and the channels through which illicit funds are spent. Making it difficult to spend illicit funds will discourage crime motivated by financial gain.

Adeniran Akinboyewa is a product analyst and product designer. He writes from Lagos. He can be reached on [email protected]