Nigeria loses an estimated $80 billion annually to illicit financial flows (IFFs), a major drain on the economy that undermines tax revenue and development. The Federal Inland Revenue Service (FIRS) is stepping up efforts to combat this menace with a national conference aimed at raising awareness and improving inter-agency collaboration.
Why the Conference Matters
Prof. Bolaji Owasanoye, former ICPC chairman and now FIRS’s Proceeds of Crime and Illicit Financial Flows (POCM-IFF) director, explains that IFFs occur through three key channels:
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Commercial transactions (60% of losses) – e.g., fake invoicing, profit shifting.
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Corruption (e.g., embezzlement).
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Criminal activities (e.g., fraud, drug trafficking).
Most attention focuses on corruption and crime, but corporate tax evasion is the biggest culprit, with multinationals using loopholes like transfer pricing to underdeclare profits.
The Hidden Tactics
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Trade misinvoicing: Companies falsify import/export documents to reduce taxable income.
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Profit shifting: Subsidiaries move earnings to low-tax jurisdictions.
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Weak enforcement: Agencies like Customs and FIRS often lack shared data to track these schemes.
Nigeria’s Response
FIRS has introduced measures like:
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Transfer pricing regulations to curb profit manipulation.
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National Single Window to streamline trade documentation.
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Collaboration with OECD on global tax reforms.
However, gaps remain. Nigeria lacks laws specifically criminalizing trade fraud, and enforcement of existing anti-money laundering laws is inconsistent.
The Way Forward
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Stronger inter-agency cooperation (Customs, EFCC, FIRS).
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Public awareness, especially via media partnerships.
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Legal reforms to close loopholes.
Owasanoye stresses that without tackling IFFs, Nigeria will keep losing vital revenue needed for infrastructure and social programs.
