Nigeria waits for promises to be fulfilled
The National Assembly has waited more than six months for the president to give his assent to anti-corruption legislation
Nigerian legislators have done everything within their power to force transparency in its oil and gas sector and curb illicit financial flows from its shores, passing the amended Companies and Allied Matters Act (Cama). But they still have a final hurdle to cross—securing President Muhammadu Buhari’s illusive signature.
“The [amended] Cama bill is meant to take care of beneficial ownership as it requires all companies in Nigeria to disclose, in their annual returns and register of members, the details of all persons with significant control, of over 5pc,” says Lagos-based Adejoke Akinbode, program officer, extractives at BudgIT, a civic organisation that uses technology to demand transparency and accountability in Nigeria.
President Buhari’s delay in signing the act into law means that many oil companies in the country will continue to ignore the Nigerian Extractive Industries Transparency Initiative (Neiti) requirement to disclose their beneficial owner register for its annual report, Akinbode says. So far, only 44 out of nearly 100 oil companies are captured in the agency’s yearly audit.
In May 2019, Nigeria’s senate passed the country’s biggest business reform bill in more than 28 years after more than half a decade of pressure from domestic civil society organisations. If the president provides his assent, it could save the country more than $15bn in yearly losses to illicit financial flows, according to BudgIT.
The amended act was “by far the most far-reaching legislation ever passed by any legislature” of the country, according to senator Bukola Saraki, a former senate president. For the first time in the country’s post-independence history, it would potentially be illegal not to disclose beneficial ownership of a company. The most significant change would be for companies operating in the oil and gas sector, as it is Nigeria’s largest source of revenue.
“The beneficial ownership register is needed in Nigeria for so many obvious reasons” Akinbode, BudgIT
“The beneficial ownership register is needed in Nigeria for so many obvious reasons,” says Akinbode. “An example is the Malabu case. [Block] OPL 245 was awarded to Malabu Oil and Gas, a company of which the then-minister of petroleum [Dan Etete] was a beneficial owner. A functioning beneficial ownership register would have flagged and potentially stopped that transaction.”
The delay to giving assent—by a Nigerian president who campaigned on an anti-corruption platform—has left the organisations fighting for accountability in the oil and gas sector in a conundrum, according to Chinedu Bassey, program officer for tax justice at Civil Society Legislative Advocacy Centre (Cislac). Cislac, a non-profit advocacy group in Abuja, was among the organisations that spearheaded the campaign for the extant Cama Act of 1990 to be amended.
“We do not know what has become of the amended act because the [six-month] window for the president to [give his] assent to the act has passed. What we know is that the president has not assented to the act and he has not rejected it either. For now, we do not know where that leaves the country in terms of the fight against corruption in the Nigerian extractive sector,” Bassey says.
It is unclear why the president has delayed giving his assent to the Act (his spokespeople were unavailable for comment). The consensus among Nigerian civil society organisations is that President Buhari’s delay in signing the act into law makes a mockery of his public commitment to a "new anti-corruption architecture".
The architecture, promised at the Anti-Corruption Summit London 2016, was to combat illicit financial flows from Nigeria and included the establishment of a beneficial ownership registry.
At the summit, President Buhari made specific commitments about exposing corruption and punishing the corrupt, as well as driving out the culture of corruption wherever it exists. In his speech, he said Nigeria would be ambitious and effective in delivering an anti-corruption architecture that would combat illicit financial flows across international borders, particularly within Africa, and introduce “stringent rules and regulations on the registration of beneficial or shell companies and disclosure of their transactions”, among other measures.
“We do not know what has become of the amended act because the window for the president to [give his] assent to the act has passed” Bassey, Cislac
Beneficial ownership information is becoming a critical component of the fight against corruption, illicit financial flows and tax evasion in resource-rich countries, according to Natural Resource Governance Institute (NGRI). Only two of Africa’s 54 governments, those of Ghana and South Sudan, have laws requiring the public disclosure of beneficial ownership of extractive companies, according to NGRI. Beyond these, countries including Nigeria and Tanzania have committed to beneficial ownership disclosure in their Eiti roadmaps.
“Successful operationalisation of the beneficial ownership provision in this bill will also imply the creation of a beneficial register by the Corporate Affairs Commission,” says Akinbode, who adds that “the more the president delays assent to the Cama bill, the more illicit flows we will continue to experience.”
Multiple organisations, including Global Financial Integrity, show Nigeria is a major source country for illicit financial transfers out of Africa—and has been for a very long time. In its report covering the period 1980 to 2009, it states that net resource transfers between $597bn and $1.4tn left Africa over this period, with Nigeria, Egypt and South Africa leading the regional outflows.
A report by the African Union’s high-level panel (HLP) on illicit financial flows from Africa showed that Nigeria accounted for 30.5pc of illicit financial outflows from the continent, losing $217.7bn during the period 1970-2008. A 2015 report from the HLP suggests that Nigeria is the top source of capital flight through illicit financial flows from the continent.
“We are talking about illicit financial flows here and, from what several research [reports have] shown, Nigeria loses an enormous [amount] of money to these illegal flows,” says Abuja-based president and CEO of Haynes-Worth Nigeria Joseph Afen.
Hidden company and property ownership are big contributors to the nearly $1tn that illicitly leaves developing countries every year, according to the Financial Transparency Coalition, a global network of governments, civil society and experts. Of that, an estimated $15.7bn of illicit money flows through the Nigerian financial system.
“If these figures are anything to go by, Nigeria is one of the top ten countries in terms of illicit financial flows,” says Uche Igwe, communications and outreach adviser at the Open Government Partnership (OGP) in Abuja.
Last year, $8.3bn in illicit outflow left Nigeria, according to BudgIT data. This amount, the non-profit says, could provide NGN25mn ($70,000) in capital to 200,000 small businesses for 18 months. This would create at least 200,000 new jobs in the resource-rich nation where more than 20.9mn people are unemployed, based on data from the National Bureau of Statistics (NBS).
“The anonymity of company ownership masks the potential existence of corrupt or criminal transactions that could deny countries of valuable income through tax evasion, money laundering and bad deals structured by politically exposed persons (PEPs),” Cislac’s Bassey says to Petroleum Economist.
Eiti says that countries registered with it will be required to request beneficial ownership information from companies that bid for, operate in or invest in their extractive sectors by January 2020. Neiti’s executive secretary Waziri Adio says he is confident that Nigeria will meet this deadline.
“We have [made] a commitment...” to “Eiti that we are going to have a register of all companies operating in the extractive sector in Nigeria by 1 January 2020. We are working with regulators in the extractive sector, the Mining Cadastral Office in the solid minerals sector, the Department of Petroleum Resources in the oil and gas sector, and others,” Adio says.
But without a law to compel oil and gas companies operating in Nigeria to abide by industry regulators’ requirement, it remains to be seen how far the register can go in helping to curb corruption.
“They are so optimistic,” says Bassey. “Being the ones that regulate the sector, [they believe] they can pull it off… Knowing the capacity of these institutions, what they can do and the resources are at their disposal, we are optimistic that it is possible that they can launch a beneficial ownership register. We will give them the benefit of the doubt.”