CHUKWU DAVID reports on the decision of the Senate to motivate the executive arm of government to take steps towards blocking revenue leakages and illicit financial flows in the country that have depleted the country’s revenue profile over the years
The greatest challenge of every government across the world in every fiscal year, is how to get sufficient funding for its annual budget, which summarily determines how successful a government is in providing good governance to the citizens as well as in fulfilling its campaign promises to the electorate.
In advanced economies, budgetary provisions for capital components of annual budgets are usually higher than those of the recurrent components.
However, the trend is different in most developing economies, where the recurrent provisions are usually higher than the capital votes.
The situation in Nigeria is worse, where corruption in both public and private sectors, has been the bane of successful and effective implementation of budgets as sources of revenue are drastically being drained by corrupt practices of those in power as well as other elements in the revenue flow chain.
Nigeria is a nation, which on yearly basis, grapples with paucity of funds to finance her budget as a result of inability of revenue generating agencies to realise projected revenues, especially as the country depends largely on oil as her main revenue source.
With the advent of the Coronavirus pandemic, which hit the world since December last year, with debilitating impact on global economic and commercial activities from February this year, nations of the world are facing greater challenges of raising funds to implement their critical projects.
Consequently, the crash of crude oil price in the international market has made it imperative for Nigeria to seek alternative sources of revenue to be able to generate revenue to implement the 2020 budget.
The country has been going into so much borrowing to meet her obligations to the people.
Apart from the fact that Nigeria has limited sources of income, the country is at the same time losing a lot of revenues to leakages through tax evasion, money laundering and other illicit financial flow. Worried by this ugly situation, the Senate on Wednesday last week resolved to block revenue leakages such as money laundering, tax evasion by international oil companies operating in the country (IOCs), proceeds of corruption and other criminal activities involving illicit financial flows.
The Senate took the decision following the consideration of a motion on “the need to review the domestic legal framework against illicit Financial Flows and to consider the creation of a Tax Amnesty for the voluntary repatriation of funds to Nigeria.” sponsored by Senator Gershom Bassey.
The Chamber resolved to invite the Minister of Finance, Budget and National Planning, Zainab Ahmed, and the heads of the Federal Inland Revenue Service (FIRS); Economic and Financial Crimes Commission (EFCC); Central Bank of Nigeria (CBN); and Independent Corrupt Practices Commission (ICPC).
These public office holders are to brief the Senate Committees on Finance, Anti-Corruption and Financial Crimes; Banking, Insurance and other Financial Institutions, on measures being sought to curb revenue loss and tax evasion and money laundering activities.
Also to be invited are the heads of the Nigerian Financial Intelligence Unit (NFIU); the Nigerian Export-Import Bank (NEXIM); Nigerian National Petroleum Corporation (NNPC), among other relevant institutions.
The Chamber mandated these committees to investigate illicit financial flows, calling for an appraisal of the Federal Inland Revenue Service’s (FIRS) current framework for tracing, identifying, preventing and sanctioning Cross-border tax evasion and other illicit financial outflows.
The Senate also directed the committees to come up with a holistic legislative framework on how to repatriate lost revenues due to illicit financial flows, mitigate such flows and provide an efficient strategy for the reinvestment of repatriated resources into the Nigerian economy.
Senator Bassey (PDP, Cross River South), in his presentation, cited a 2014 Global Financial Integrity Report say“Nigeria lost a minimum of US$140 billion to illicit financial flows between 2000 and 2014, mainly to crude oil and commercial activities mis-pricing.”
According to the lawmaker, “this economic loss to the country was not abated, as Nigeria was ranked among the global top 30 countries of illicit financial outflows by dollar value, with US$8.3 billion in illicit outflow from Nigeria in 2015.”
Bassey expressed worry at further findings by the Tax Justice Network and International Monetary Fund (IMF) “that developing countries, including Nigeria, had lost over US$200 billion per year to illicit financial flows as multinational corporations neglect, fail and/or refuse to pay taxes in these countries where they generate substantial amounts of profit.” “Nigeria loses approximately US- 15billion annually to offshore tax evasion.
This has resulted in consistently low tax revenue as a percentage of Gross Domestic Product (GDP), as low as 5.7 percent in 2017. Such statistics are alarming, especially when compared to the 17.2 percent average of 26 African countries in the same year,” Bassey said.
He added that “this incessant financial drain on the Nigerian economy continues to have negative implications for domestic resource mobilization and long-term economic growth and development.” “IFFs continue to pose serious obstacles to development, as approximately five percent of the IFFs from Africa can be attributed to corruption, while 95 percent of IFFs come commercial and criminal activities.
These unrecorded and untaxed Cross-border transfers, could have been mobilized as part of government revenue and injected into Nigeria’s formal economy towards sustained development and economic growth,” the lawmaker noted.
Bassey expressed concerns that statistics had shown that the amount of revenue lost annually by Nigeria was more than the sums provided as development aid. He said: “For example, the net official development aid received by Nigeria in 2017 was US$3,358,790,000.
Additionally, the United States Agency for International Development (USAID) has donated over US$526.7 million in humanitarian assistance to Nigeria and the Lake Chad Basin, since 2017. Neither of the above figures match the estimated US$15 and US$18 billion Nigeria loses to IFFs annually.” The lawmaker lamented that though Nigeria had at least 12 institutions and agencies responsible for tackling illicit financial flows (IFFs), the country continued to be menaced by weak regulatory structures and the complicity of other financial secrecy jurisdictions, among others. He added that global awareness had prompted governments across the world to develop measures and policies aimed at eradicating the perpetuation of illicit financial flows (IFFs), such as the Organization for Economic Co-operation and Development (OECD) Common Reporting Standard (CRS).
Bassey stressed that with the domestication and implementation of such international legal framework, Nigeria would stand to curb future revenue losses due to tax evasion.
If and when these proposed interventions by the apex legislative assembly are fully implemented, there is high optimism that the country’s revenue leakages will drastically reduce and there will also be appreciable rise in the nation’s revenue profile, with corresponding developments across the country.