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World’s poverty capital and illicit financial flows!

By Henry Boyo

THE Brookings Institution, a Washington based Economic think-tank, published a report earlier this year, titled “The start of a new poverty narrative.” The report was primarily based on the work of three experts associated with the ‘World Poverty Clock, an Economic Study Group launched, in 2017, to track trends in poverty reduction.

Buhari, show us your certificate – Reno

Nigeria’s poverty level is very high

Notably, by early 2018, according to its latest projections, “Nigeria had reportedly overtaken India as the country with the largest number of ‘extreme poor’, while despite its enviable mineral endowment, DR Congo could soon take over the number two spot.”

Corrupt people should be viewed as `criminals not celebrities’—NYCN

The Brookings report “suggest that Nigeria had about 87 million people in extreme poverty by May 2018, compared with India’s 73 million (from over 1.34 billion population in 2017).”

The increasing concern, however, “is that extreme poverty, is growing by six people every minute in Nigeria, while conversely, poverty in India, continues to fall at a rate of 44 persons per minute!” The report projected that “in Africa as a whole, there will be about 3.2 million more people living in extreme poverty by December 2018,” than six months earlier, when the report was published. Furthermore, the Study Group also estimated that “Africans account for about two-thirds of the world’s extreme poor” and therefore observed that “if current trends persist, Africa will account for nine-tenths of the World’s extreme poor by 2030,” while, “fourteen countries (out of 18 worldwide) where the number of extreme poor is rising – will be in Africa;” this development has consequently made it increasingly difficult to achieve the first of the UN’s “Sustainable Development Goals”, which is the eradication of poverty.

Incidentally, the above narrative probably corroborates the African Development Bank’s observation, in February 2018, that “152 million Nigerians, representing almost 80% of the country’s estimated 193.3 million population, allegedly live on less than $2 per day.”

Nonetheless, according to the authors, the aim of the study was, notably, to demonstrate “the speed (and) not the level of poverty reduction”, which is generally celebrated everywhere, despite the actual reality that the present speed in poverty reduction is much slower than is required to eliminate poverty, particularly in Africa,” the continent which has the fastest growing population of any major region; conversely, India with a population growth rate probably below 1% reportedly enjoys superior economic development.

The above notwithstanding, Nigeria’s Trade, Industry and Investment Minister, Okechukwu Enelamah, however, suggested that the figures which predicated the Brookings study, only reflected a period when Nigeria’s economy was in recession, and therefore, according to the Minister, “the indicators, adopted are outdated.”

Similarly, Nigeria’s Minister of Budget and National Planning, Udo Udoma, also disputed the conclusion of the report “that the poverty situation is getting worse in Nigeria.” The Minister therefore dismissed the report as unreliable, since it was not based on any recent, survey on household data, compiled by the National Bureau of Statistics on Nigeria’s poverty level. Nevertheless, according Udoma, the Nigerian Government remains committed to its Economic Recovery and Growth Plan, by developing labour intensive sectors such as “agriculture, manufacturing, housing and construction to create 15 million jobs by 2020.”

The preceding narrative may suggest that Africa’s, relatively faster population growth rate, may propel extreme poverty further, if higher rates of development continue to elude the continent; the impact of such poor growth will be particularly evident in Nigeria, which holds the title of the World’s greatest producer of poor people presently. In this event, the present perception of Africa and Nigeria, in particular, as the World’s ‘sick family’ may become difficult to dispel.

Although the above grotesque tapestry of Africa is very disturbing, curiously, nonetheless, an examination of Capital flows between Africa and the rest of the world, may not support the popular notion of a Continent that is unrepentantly retrograde and seemingly unwillingly to help herself, as it seems rather content to remain the World’s major attraction for morsels of aid and doses of charity from time to time.

Instructively, however, a report published, in February 2018, by the Organisation for Economic Cooperation and Development (OECD) has suggested that Africa is, actually far from the popular image of the “World’s Poor Cousin”. The OECD report titled “Illicit Financial Flows; the Economy of Illicit Trade in West Africa,” conversely suggests that illicit financial flows actually cost African Countries at least $50bn annually; i.e. more than the $41bn total Development Aid, the continent receives yearly.

Indeed, according to UN’s Economic Commission for Africa, these illicit flows have been increasing since year 2000, when they stood at less than $20bn/year. Another report from a United Nations/Africa Union collaborative effort, headed by former South African President Thabo Mbeki, also suggested that companies and government executives are illicitly moving $60bn out of Africa each year, and that these illicit flows are impeding development in Africa; the study estimates that if funds leaving Africa illicitly had remained on the Continent, Africa’s Capital Stock would have expanded favourably by more than 60%, while GDP per capita would also be 15% more.

These studies also suggest that “Large companies move money illegally through trade misinvoicing, abusive transfer pricing, wrong invoicing of services and intangibles and use of unequal contracts. These companies also take advantage of the insufficient information and capacity restrictions of government agencies to participate in base destruction and profit-shifting activities.”

The tricks used, according to reports, range from under-invoicing by loggers in Mozambique, to Nigerian officials sending cash earned dishonestly abroad with CBN facilitation through Bureau-de-Change.” In Nigeria, some of these culprits also conspire to secretly sell hundreds of thousands of barrels of oil daily; a practice described, in the report, as “looting on an industrial scale.”

However, Vice President Osinbajo who spoke in Abuja, in September 2018, at an International Conference on Combating Illicit Financial Flows (IFF) and Enhancing Asset Recovery (AR), noted that it will require global outrage, similar to the International response on Human and Drug Trafficking or Terrorism financing to stem illicit financial flows.

Foreign Minister, Geoffrey Onyeama also described as mind boggling, the difficulties and hurdles faced in the recovery of looted assets from foreign countries to developing countries. Onyeama was alarmed and exclaimed, with regard to $321m recently repatriated from Switzerland that “my God, when you look at the details, I was shocked and extremely angry at the process of recovery. Percentages were paid to all kinds of institutions. To me this is daylight robbery that these countries are perpetrating; they are not only condoning the huge theft, they are also accessories after the facts.” Instructively, Switzerland paid out over 30% from various fees on Abacha’s $1bn loot, while the funds, unexpectedly, did not earn a single dollar as interest, even after 20 years!

 


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