Offshore scandals: Nigeria is paying lip service to tackling dirty money
First, it was the Panama Papers; now the Paradise Papers. Both were scandals involving prominent people around the world who hide their wealth in tax havens. In both cases, investigative journalists leaked huge data that disclosed the names of those engaged in this activity. Unsurprisingly, both leaks included the names of prominent Nigerians. However, while the scandals triggered widespread outrage worldwide, with more than 70 governments launching probes, in Nigeria, official and public reactions were muted, even nonchalant. Nigeria, it would seem, is remarkably blasé about the dangers of dirty money.
I mean, consider the reactions in other countries. In Iceland, public unrest triggered the resignation of its prime minister over his undisclosed holdings. In Britain, 66 criminal investigations were launched, and the then prime minister, David Cameron, although did nothing wrong, was forced by a hostile public to publish his tax returns for the previous six years simply because his late father had an offshore unit trust in Panama. And in Pakistan, Prime Minister Nawaz Sharif was forced to resign as the leak exposed his family’s hidden assets in the havens. These are just a few examples of the backlash across the world.
The global response signalled a strong disapproval of secrecy havens. In their book, “The Panama Papers: Breaking the story of how the world’s rich and powerful hide their money”, the two journalists who leaked the offshore scandal, Bastian Obermayer and Frederik Obermaier, argue that financial manoeuvres through secrecy havens are “not just a private matter; they are a problem for the whole world”. They are right, of course.
And here is why. Tax havens provide secrecy space that allows for activities that are morally questionable, and even criminal. Last year, after the Panama Paper exposure, 300 economists, including Nobel Laureates, published an open letter arguing that there is no economic benefit to tax havens. So, why would anyone hide money in them? Well, the answer is that in most, if not all, cases, the aim is to launder money, evade tax or conceal assets. All of which, without a doubt, make the use of secrecy havens not just a private affair, but a matter of legitimate public interest.
Yet such issues are treated almost as private matters in Nigeria. For instance, all the public officers, past and present, named in the Panama Papers simply shrugged it off. Take the Senate President, Bukola Saraki, who was named in both the Panama Papers and the Paradise Papers. He refused to resign, and, in fact, insisted he did nothing wrong. Nigeria is probably the only country where the head of the highest law-making body can have undisclosed assets in secrecy havens around the world, and yet stay in office!
But what about the government? As I said above, the Panama Paper leak led more than 70 countries to launch probes or criminal investigations. But not in Nigeria! Recently, the minister of finance, Kemi Adeosun, said that the federal government would investigate Nigerians linked in both the Panama and Paradise Papers with having offshore accounts in tax havens. She said their tax declarations would be checked to see whether they paid the applicable taxes before transferring funds or assets to a tax shelter.
Lest we forget, the Panama Papers were leaked in April 2016, nearly two years ago! So, why has there been no investigation or probe so far? Of course, no investigations would take place, or, if they did, lead anywhere. Nigeria is a country, where, for political and other reasons, some people are untouchable. The Buhari government is losing its anti-graft “war” precisely because it has been politicised, and hijacked by powerful individuals. The ongoing face-off between the State Security Service (SSS), the National Intelligence Agency (NIA) and the Economic and Financial Crimes Commission (EFCC) is evidence of what happens when a campaign to fight corruption lacks institutional credibility. Thus, in that context, the idea that the offshore activities of powerful Nigerians could be probed sounds hollow.
Yet, there is a real problem, not only of tax evasion but of money laundering. In 2015, Nuru Ribadu, former chairman of the EFCC, made a mind-boggling statement that “Everything that is wrong about Nigeria has to do with dirty money”. He added: “When I look around, I see a lot of investment done with dirty money”. Of course, as a former chairman of the EFCC, Ribadu should know about such things. But does the government agree with him? For if it does, it would swiftly seize on any information about the hidden assets of Nigerians in secrecy havens and establish serious probes for evidence of illicit financial outflows.
All of this matters, of course, because Africa, particularly Nigeria, suffers chronically and acutely from illicit offshore activities. In a recent online course, Professor Paul Collier of Oxford University discussed the nature and extent of the problems, which he described as the “bad and ugly of private capital outflows in Africa”. The first is the outflows of money that should have been taxed, but isn’t; the second is the outflows of corrupt money, stolen funds stashed away in havens, and that can’t be traced because they are protected by walls of secrecy. Professor Collier said that Africa is losing $200 billion a year in the two outflows.
Of course, Nigeria accounts for much of that loss. Nigeria is a country that has a serious challenge with raising taxes, and a serious problem of tax evasion. According to one estimate, tax as a share of non-oil GDP in Nigeria is only 3%. Apart from the skulduggery of the tax-dodgers, the truth is that there is a huge asymmetry of information between Nigeria’s tax authority and those, companies and individuals, expected to pay taxes. What’s more, Nigeria lacks the ability to build a really skilled and incorruptible team of tax collectors. Although the Federal Inland Revenue Service, FIRS, has improved since Babatunde Fowler became its executive chairman, the capacity deficit is still significant.
Nigeria also faces an acute challenge with the second form of illicit capital outflows, namely stolen money laundered abroad. It is widely estimated that Nigerians have siphoned several billions of dollars overseas. President Buhari has always harangued and called on the world to return Nigeria’s stolen money. Indeed, at the first international anti-corruption summit held in London last year, it was agreed that a Global Forum for Asset Recovery would be set up to begin the process of returning stolen assets to Nigeria and a few other countries. That, of course, is easier said than done, not least because of the logistical and legal nightmares.
Surely, the pernicious problem of illicit financial flows requires global actions, such as creating public registers of beneficial ownership, automatic global exchange of information about bank accounts and, indeed, the blacklisting of tax havens. However, a lot must be done at home to tackle the problems of tax evasion and outflows of corrupt money. Sadly, Nigeria is not doing enough domestically.
To be sure, on tax evasion, the Voluntary Assets and Income Declaration Scheme (VAIDS), launched by the Buhari government, is a good idea in principle. But, in Nigeria, such campaigns only have any impact, if at all, on the small fries, not on the big fishes, the powerful and influential. Exhortation is, of course, important, but it’s certainly not enough. Some big and high-profile tax-dodgers must be scapegoated to send powerful signals about the government’s no-nonsense intentions.
On the problem of illicit wealth, well, my view, previous expressed in this column, is that Nigeria’s asset declaration system is not fit for purpose. It doesn’t achieve wealth monitoring. Sometime ago, the vice president, Yemi Osinbajo, said the government would ensure past and present public officers account for their wealth. Any progress on that? Why has Nigeria not introduced, as the UK has done, Unexplained Wealth Orders? And where is the stringent anti-money laundering law and enforcement regime?
Truth is, despite its moralisation and preachiness, the Buhari government is insouciant about tackling illicit capital outflows. Its lukewarm response to the offshore scandals betrays its lax attitude to the scourge of dirty money.
OLU FASAN