A report released by the Nigeria Extractive Industries Transparency Initiative (NEITI) in partnership with Trust Africa (TA), has revealed that Nigeria’s oil and gas sector contribute the most to the illicit financial flows recorded annually in the country.
The report specifically noted that 92.9 per cent of the total amount of illicit financial flows (IFFs) in Nigeria annually were from businesses in the oil and gas sector.
Titled ‘Averting Illicit Financial Flows in Nigeria’s Extractive Industry’, and released in Abuja on Tuesday, the report stated that while it was generally difficult to measure IFFs as a result of their illegality, types of activities and data challenges, the organisations were able to pinpoint the country’s oil sector as the highest contributor to the illegality on a yearly basis.
Of the 92.9 per cent contribution of the sector to IFFs in Nigeria, illegal oil bunkering accounted for about 35 per cent, while commercial transactions by multinationals that dominate the sector contributed more than 60 per cent.
The NEITI and TA report explained that the culprit firms were found of evading tax and launder funds, adding that the country’s oil sector had remained vulnerable to IFFs due to Nigeria’s economic dependence on the sector.
The report stated, owing to the huge influence of the political class, the sector has remained technically and structurally complex.
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The report also noted that Nigeria’s reliance on the cash-based economy was another reason why IFFs thrive in the country.
NEITI and TA stated that opportunities for IFFs through fraud and money laundering in Nigeria’s oil industry generally started as administrative control failures by those expected to exercise statutory and regulatory frameworks in the industry.
According to the report, such acts result in high politicisation of discretionary powers, inadequate corporate governance, regulatory capture, political interference, conflict of interests, tax evasion and bribery.
In its recommendations, the report stated that mitigating the risks of criminal activities, increasing scrutiny and accountability of processes and promoting effective demand-side accountability platforms would help check illicit financial flows in Nigeria.