As a developing country, Nigeria has played host to multinational corporations long before independence till date. Kumar (2015), defined MNCs as those large firms which are incorporated in one country but which own, control and manage production and distribution facilities in several countries. With the passage of time, the MNCs have tremendously grown into large and highly efficient international political economy and have successfully gained greater leverage in the economics of developing countries such as Nigeria. Today, MNCs traverse and dominate the landscape of Nigerian economy and are very rich in all ramifications due to humongous profit they make.
Consequently, today, Unilever multinational company, Shell Petroleum Development Corporation (SPDC) Chevron, Texaco, Exxon Mobil, Totalfina Elf, Agip and Addax operate in Nigeria.
Thus, from a global perspective, capital flight diverts money and tax revenue from poor countries like Nigeria to rich countries and deprive them, domestic resources needed for achieving the United Nations Sustainable Development Goals (SDGs) in healthcare, poverty reduction, infrastructure and other areas of public investment (Global financial integrity 2019). Invariably, Nigeria loses substantial amount of money through capital flight, that is, out flows of cash and securities – part of which is illegal and if these secret funds come into limelight, they would be subject to tax.
Furthermore, capital flight drains an economy through weakening the value of the country’s currency, hurting domestic banking sector, undermining public investments and ability of the government to increase real Gross Domestic Product (GDP).
Moreover, Olatunde (2011) opined that MNC’s are involved in tax evasion and tax avoidance and transfer pricing all of which have detrimental effect on the provision of modern infrastructure, public services and utilities.
The mechanisms of capital flight can occur in various ways and is almost impossible to develop an exhaustive inventory or channels. It can occur through cash or monetary instruments. These are usually foreign currency and domestic currencies etc. Also, it can be through false invoicing of trade transactions whereby export and import invoices are either different from agreed prices or faked. That is, the exporters will systematically engage in under-invoicing while importers over-invoice and in the process derive foreign exchange.
It is instructive to note that Multinational Oil Companies (MNC’s) are channels through which the numerous mind-boggling deals with well-placed Nigerians are carried out.
Furthermore, the Nigerian oil and gas is divided into four parts namely, the upstream sector, the downstream sector, the gas sector and the regulatory authority. The upstream sector deals with exploration (offshore and onshore), extraction of oil and gas production. Offshore production involves deep under water drilling below surface of the water and this is where the huge chunk of illegal funds is diverted outside the country by oil multinationals. Nigeria is also being ripped off at the downstream sector which entails refining of crude oil, conversion of petroleum chemicals products including distribution and marketing of finished products. The gas sector is also not spared of capital flight. In Nigeria, most of the gas is flared leading to enormous loss revenue to the country.
The regulatory authority which handles award of oil blocks, oil fields licenses, oil lifting licenses and signature bonuses includes the Ministry of Petroleum Resources, Nigerian National Petroleum Corporation (NNPC), Department of Petroleum Product Prices Regulatory agencies (DPPRA) and the National Oil Spills Detection and Respond Agency (NOSDRA) (Dioru, 2018).
The Nigerian regulatory agencies are weak while trade rules are rarely enforced. It is pertinent to note that capital flight is illegally done in cahoots with officials in charge of agencies that supervise the activities of MNC’s.
However, the agencies can be active if corruption, the bane of Nigeria permits.
Read also: The multinational exodus from Nigeria: A balanced perspective
Implications for development
The operations of multinational corporations in no small measure will have far – reaching and wider implications on Nigerian’s development.
One. Inability to develop a homegrown technology
The MNC’s are generally regarded as the principal agent through whom technological transfer occurs. But they intentionally and deceitfully introduce inappropriate technologies that hinder indigenous advancements. Besides, most of the imported technologies come under the industrial property system or restrictive patent and license. This is a very sensitive barrier for Nigerians.
The implication of these is that Nigerians cannot copy and internalise these technologies even if they have the capacity. In view of this, Nigeria has to do with dependent development which has several deleterious economic consequences and its chances of developing an autochthonous technology becomes a mirage.
Two. Impact on human development
The MNC’s jealously guard their technological know-how by way of refusing to make use of competent staff. They are ethno-centric in staff recruitment and selection. This has resulted in brain-drain of Nigerians to foreign countries for greener pastures. To buttress this fact, Ugwulebo (2003) noted that the best brains in Nigeria are compelled by the logic of their environment and existence to migrate out in search of greener pastures. The MNC’s use mere technicians who are at the last rung of the productive process to assemble what they knew not how it was produced.
Three. Suppression of indigenous entrepreneurs
It will be recalled that due to the advanced technological base of MNC’s, they have continued to dominate the Nigerian economy and straddle the indigenous entrepreneur landscape and, in the process, created a business monopoly. Their activities in the mass production process have crippled indigenous entrepreneurship and hampering them from taking advantage of Nigeria’s huge business potentials. An example is the Unilever MNC. It sells consumer products which include food and beverages, cleaning agents, beauty and personal care products. Since Nigerians have a penchant for foreign made goods, they will always patronise bathing soap made by a foreign company than those manufactured in Aba, Abia State. Through this process, MNC’s stifle indigenous entrepreneurs.
How to minimise effect of capital flight:
A. Strict penalties and sanctions
In no small measure, strict penalties and sanctions should be introduced to curb untoward practices of MNC’s. The government should impose stiff penalties on directors of companies and even close down activities of defaulting MNCs. That will ensure they stop their nefarious and illegal activities which have gone on for so long.
B. Effective regulatory mechanism
Investors should be screened to make sure that only genuine ones with interest of Nigeria are licensed to do business in the country. This will ensure that their investments complement the developmental objectives of the country.
C. Government intervention in activities of MNCs and honest participation
There is no gainsaying the fact that it is only through active government participation and intervention in operations of multinational companies will tamper and minimise their nefarious activities on the Nigerian economy. Thus, evidences have shown that MNCs’ strangle-hold on the country’s economy is not wholly beneficial but reduces the chances of Nigerians achieving meaningful economic development.
Emmanuel, a public affairs analyst, lives in Owerri, Imo State
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