The rising growth in international trade and globalisation, in the last few decades, has inadvertently resulted in insignificant growth in illicit trade. The size of illicit trade has assumed an alarming dimension and is now globally estimated to run into hundreds of billions of dollars annually by economic watchers. Illicit trade increases costs undermine legitimate economic activity and deprives governments of the much-needed revenues for investment in vital public services. It is also at variance with the UN’s Sustainable Development Goals (SDGs).
At a recent forum, in Switzerland, organised by the United Nations Conference on Trade and Development (UNCTAD) in collaboration with a US-based non-governmental organisation, the Transnational Alliance to Combat Illicit Trade (TRACIT), the threat of illicit trade to positive development and, particularly, its negative impact on the attainment of the Sustainable Development Goals (SDGs) was brought to the fore.
Specifically, the impact of illicit trade on the 12 key sectors that participate significantly in international trade came into focus with the launch of TRACIT’s new report, “Mapping the Impact of Illicit Trade on the Sustainable Development Goals, which investigates the impact of illicit trade on these sectors vis-à-vis the 17 United Nations SDGs. The sectors include petroleum, agri-foods, pharmaceuticals, alcohol, fisheries, tobacco, forestry, precious metals and gemstones, pesticides, and wildlife, etc.
Findings from the report show that illicit trade activities significantly compromise achievement of the SDGs by crowding out legitimate economic activity, depriving governments of revenues for investment in vital public services, dislocating hundreds of thousands of legitimate jobs and causing irreversible damage to ecosystems and human lives.
Nigeria also suffers some economic consequences on account of illicit trade in the country. Some of the most illicitly traded goods in Nigeria are precious stones, tobacco and pharmaceuticals. This situation is further compounded by the rising spate of insecurity and terrorism, especially in the North. The light weight, high value, high durability, and portability of some of these commodities make them especially attractive to launderers and criminal financiers.
For example, gold in Zamfara is regularly smuggled out of the country to neighbouring African countries, namely, Niger and Togo. It is one of the mineral deposits, including tin and zinc, that are illegally mined by artisans who account for about 80 percent of the mining activities in the country.
According to Bawa Bwari, the immediate past minister of mines and steel development, between 2016 and 2018, Nigeria reportedly lost about N353 billion in gold smuggled out of the country and sold in the international market without any revenue accruing to the government.
The consequences for the nation’s security are even dire. In April 2019, following intelligence reports, which Mohammed Adamu, the Inspector-General of Police claimed, “established a strong and glaring nexus between the activities of armed bandits and illicit miners,” the federal government had to suspend the mining of the mineral in Zamfara State. Prior to the suspension, the state and neighbouring states in the region had witnessed a breakdown of security, in spite of heavy presence of police, military, and local security forces that were deployed to contain the activities of criminal gangs responsible for a flurry of horrific bloodshed and kidnappings.
It is well-documented that cigarettes are the most illicitly traded products worldwide, having higher occurrence in developing economies. Nigeria is not an exception as the commodity is very susceptible to illicit trade. The World Health Organisation (WHO) defines illicit trade in tobacco as, “any practice or conduct prohibited by law which relates to production, shipment, receipt, possession, distribution, sale, or purchase of tobacco products; or any conduct intended to facilitate such activity.”
It is estimated that one in every 10 cigarettes sold worldwide is illicit. This amounts to losses valued at tens of billions of dollars. Due to the nature of the product, illicit tobacco is easily transported and disguised, thereby, making it a high-profit opportunity.
Also, a close connection between illegal cigarettes and its funding of criminal activity has also been well established. Illicit cigarette is a choice commodity in transnational organised crime and the illicit tobacco market is increasingly linked to the narcotics trade. The product is often illegally shipped under dubious disguises, including false bills of lading for other commodities.
A 2011 US report into illicit tobacco: “The global illicit trade in tobacco: A threat to national security”, notes that traffickers view it as a low-risk, high-reward criminal activity which can fetch millions, with little risk of detection or harsh punishments. The perpetrators and their networks also easily circumvent international borders.
The above notion is closely associated with the misguided belief that illicit trade in tobacco is a victimless crime, which tends to allow the crime to fester. Evidently, the lost tax revenue emanating from cigarettes and tobacco products smuggled into a country undermines government’s capability to provide essential services. Besides, the products are usually substandard and do not meet the various health regulations and violate numerous other laws and regulations. Consumers, manufacturers, and retail outlets also suffer consequences of illicit trade in tobacco products.
Another reason adduced for the growing black market in tobacco is increasing excise and inadequate law enforcement. The former has the unintended consequence of aggravating illicit trade and thereby erasing any gains intended by the increase in excise.
Illicit trade is also rampant in pharmaceuticals and poses a major threat to public health. It involves the manufacture, distribution and sale of substandard, falsified, unregistered and unlicensed drugs as well as their theft, fraud, illicit diversion, smuggling and trafficking. The trade also applies to generic versions of prescription drugs and over-the-counter (OTC) medicines, including fake medical devices such as syringes, surgical instruments, contact lenses, condoms, among others.
The World Health Organization (WHO)estimates the value of illicit trade in pharmaceuticals at between $75 billion to $200 billion annually, in terms of value. WHO’s statistics also shows that the share of counterfeit medicines on the market ranges from over 10 percent of total sales in developing countries to as little as 1 percent in developed countries. Apart from creating economic and social challenges to pharmaceutical companies it also further diminishes already limited healthcare budgets and resources.
Lately, NAFDAC has been working assiduously to improve public awareness on the dangers of fake drugs as well as strengthen some control measures such as SMS confirmation of the authenticity of various medicines. However, a lot still needs to be done especially in the area of in-market enforcement by respective regulatory agencies. The recent increase in the sale and distribution of sub-standard cigarettes without standard health warning in major wholesale markets in Aba and Kano necessitates that Standards Organisation of Nigeria (SON) rev up its market surveillance and enforcement action to stem the tide.
Low public awareness, in addition to widespread corruption, enables drug counterfeiting rings to thrive. A vast majority of people, especially the poor, are easily deceived to buy seemingly cheaper alternatives, apparently unaware of the danger posed by the counterfeits. This makes them easy targets for the entrepreneurs who profit from this illicit trade in pharmaceutical products.
AKINREMI SOBOWALE
Sobowale is of the Centre for Promotion of Enterprise and Business Best Practices
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