Unmasking The Hidden Drain Of Illicit Financial Flows
For over two decades, the issue of Illicit Financial Flows (IFFs) has been a major concern for the African continent as assets and funds running into billions of dollars continue to find their way out of the continent as a result of corrupt public servants and multinational corporations. Their destination is the Western and European countries.
Though stakeholders including the African Union Member-States have played significant roles in the international efforts to combat these opaque and destabilizing transfers of capital, such efforts have not yielded the desired goal.
Tackling corruption and IFFs have become a matter of survival for Nigeria’s and Africa’s development and must be treated with urgency. There is a broad consensus that the funds being illegally channeled out of Nigeria and Africa, could be channeled towards the continent’s development if successfully retained.
Former President of South Africa and the Chairman of the African Union High Level Panel on IFFs, Thabo Mbeki, had stated that the African Continent suffered an annual loss of over $50bn as at 2015 through IFFs, which has over the years grown to $80bn yearly.
Mbeki had in 2022 made a spirited call for a United Nations Tax Convention to halt illicit financial flows from Africa and multinational and corporate tax abuse.
He had also called for the establishment of a globally inclusive intergovernmental tax body to strengthen global efforts against IFFs.
As part of measures towards addressing the IFFs, between Tuesday, July 22 and Wednesday, July 23, senior government officials and heads of government agencies, law enforcement agencies and anti-corruption agencies, financial regulators, the diplomatic community, civil society leaders, development partners, and international experts assembled in Abuja for the National Conference on Illicit Financial Flows (IFFs), themed “Combating Illicit Financial Flows: Strengthening Nigeria’s Domestic Resource Mobilisation.”
The gathering, which was spearheaded by the soon to become Nigeria Revenue Service, the Federal Inland Revenue Service, the country’s foremost revenue agency, became a defining moment for Nigeria’s fiscal future, a turning point in a struggle to reclaim billions of dollars lost through opaque financial maneuvers.
A Threat That’s Hardly Theoretical
The Minister of State for Finance, Dr. Doris Uzoka-Anite, opened the conference with a warning that set the tone. “IFFs are the hidden drain pipes of our national wealth. They undermine revenue generation, erode tax bases, fuel corruption, and reduce the resources available for critical investments in health, education, infrastructure, and social protection.”
She did not mince words: “Illicit financial flows are not inevitable. They thrive where systems are weak and coordination is absent—but they can be stopped when political will meets institutional resolve.”
Her words underscored the severity of the crisis and Nigeria’s determination to confront it head-on. At the core of the national discuss is a staggering revelation: Nigeria is estimated to lose $18bn annually to illicit financial flows, primarily due to profit shifting and aggressive tax avoidance techniques by multinational corporations operating in the country. That’s money never reaching the public coffers—funds that could build roads, equip hospitals, fund classrooms, and create jobs.
“With fewer hospitals and schools, fewer police officers on the street, fewer roads and bridges,” lamented Minister Uzoka-Anite, “This leak in our financial system is undermining the wellbeing of ordinary Nigerians.”
A Fusion Of Innovation, Reform
Recent years have seen meaningful steps toward interrupting these financial flows. The Federal Inland Revenue Service (FIRS) has led digital transformation initiatives. Under the leadership of Executive Chairman, Dr. Zacch Adedeji, FIRS has established a Tax Intelligence and Automation Department—equipped with real-time analytics to detect anomalies and potential evasion.
He said, “Each unaccounted dollar undermines governance, erodes trust, and translates into lost infrastructure, inadequate public services, and deepening inequality.
“The scale of these flows, especially through aggressive tax avoidance by multinationals exploiting opaque global arrangements, continues to threaten Nigeria’s fiscal stability.”
Nigeria, like many resource-constrained countries, reportedly loses billions of dollars annually through such illicit conduits. The FIRS boss stressed that addressing the issue is not just a policy debate but a “national imperative”.
Adedeji highlighted the administration of President Bola Tinubu’s commitment to fiscal reform, referencing the recent signing of four tax reform bills under the Renewed Hope Agenda.
These legislative changes aim to overhaul the tax system, modernise legal frameworks, and institutionalise transparency in revenue collection.
However, he warned that legal reforms alone are insufficient. To effectively combat IFFs, the FIRS Boss said Nigeria must strengthen enforcement, leverage technology, and foster public trust through fairness and strategic communication.
“We are building a tax system that is proactive, smart, and secure,” Adedeji stated. “This is not just about digital infrastructure—but digital vigilance.”
The FIRS has also established the Proceeds of Crime Management and Illicit Financial Flows Coordination Directorate, mandated by the Proceeds of Crime Act (2022), aimed at unifying enforcement efforts and enabling coordination with domestic and international partners. These institutional reforms provide Nigeria with critical tools needed to identify, trace, and recover illicit assets.
Nigeria’s commitment extends beyond its borders. The country has taken an active role in global anti-IFF platforms including the Thabo Mbeki-led-Africa Union High-Level Panel, the Addis Tax Initiative, and ongoing UN-led negotiations toward a UN Tax Convention, aimed at ensuring global tax equity.
Despite progress, systemic challenges impede full impact. One fundamental barrier is Nigeria’s lack of comprehensive data collection and analytics infrastructure. As Nigerian experts Andrew Onyeanakwe and Dr. Paulinus Iyika have noted, “There is currently little or no access to comprehensive and reliable data on IFFs.”
While progress has been made tracking commercial tactics such as transfer pricing and trade misinvoicing, the data on flows tied to criminal activity, official corruption, or other illicit means remains fragmented and incomplete.
Echoing this, Adedeji acknowledged the data deficit: “We have tools to spot anomalies, but without high-quality data—cross-referenced and timely—our vigilance is only as strong as our weakest dataset.”
Breaking Down Institutional Silos
Tied to the data deficit is a more intangible but equally vital challenge: lack of trust among agencies. Nigeria Customs Service (NCS), Central Bank of Nigeria (CBN), EFCC, ICPC, NFIU, SEC, CAC, and NBS have all made strides individually. Yet they often operate in silos, with limited collaboration and minimal data sharing—hampering efforts to build a holistic picture of financial flows.
Uzoka-Anite was blunt in calling for change: “Our strategy is anchored on three pillars: policy alignment, transparency, and digitalisation. But none of this will work unless we break down the silos—unless we ensure real-time data exchange, unified intelligence, and collective accountability.”
Pathways Forward: A National Blueprint
In response, the conference’s core policy agenda outlined a multi-pronged initiative. Stakeholders agree that Nigeria must undertake an exhaustive mapping of IFF vulnerabilities, illuminating the transactions, sectors, and processes most at risk including illicit trade, money laundering, profit shifting, and corrupt financial schemes.
The conference brought into sharp relief Nigeria’s role in international tax justice. Hon. Irene Ovonji-Odida, a member of the AU/ECA Mbeki Panel, highlighted the scale of loss—$50bn annually from Africa, propelled by corruption and global secrecy jurisdictions.
She warned that these “mechanisms enable corporate and elite wealth to leave Africa, perpetuating underdevelopment.”
Ovonji-Odida placed high hopes on Nigeria’s leadership in UN negotiations: “These ongoing UN discussions for a Tax Framework Convention represent our once-in-a-century chance to rebalance the global tax rules. Nigeria must lead. This is our opportunity to make history.”
Turning Diplomatic Dialogue Into Domestic Action
Reforming national systems is one thing; ensuring lasting impact requires relentless implementation. The Minister echoed this urgency: “The time for incremental steps is over. We must act with courage, speed, and collaboration.”
Adedeji reinforced this urgency. He said, “Criminal financial networks are evolving fast—adapting to digital innovation, secrecy jurisdictions, and anonymized ownership. Our response must be equally intelligent, tech-enabled, and globally coordinated.”
Beyond the financial calculus lies a deeper narrative: every naira lost to IFFs equates to an uneducated child, an underpaid nurse, or a rural road untarmacked. These losses ripple across public trust, governance, and national cohesion.
Nigeria’s Renewed Hope Agenda hinges on reversing these trends—reclaiming scarce domestic resources and reinvesting them into infrastructure, social safety nets, and inclusive economic growth.
If Nigeria’s national conference is more than a talking shop, if its policy blueprints translate into action, stakeholders are of the view that the nation may yet reclaim billions funneled overseas—and channel them into national prosperity. But this transformation requires one essential ingredient: sustained, united political will.
END
Unmasking The Hidden Drain Of Illicit Financial Flows is first published on The Whistler Newspaper
