AFDB Speaks on Solutions as Nigeria, Others Lose $1.6bn Daily to Illegal Forex

• AFDB said Africa loses more than $1.6 billion per day as a result of illicit money transfers and profit-shifting
• According to the IMF, Illicit financial flows are cross-border money transfers that have an illegal origin
• For many years, the IMF has played a significant role in international efforts to halt these unclear and often destabilizing transfers

Legit.ng journalist Zainab Iwayemi has 5-year-experience covering the Economy, Technology, and Capital Market.

African Development Bank has stated that illegal money flows and profit shifting by multinational corporations doing business in Africa cost the continent over $1.6 billion per day.

In an interview with The PUNCH, Kevin Urama, the AfDB's Chief Economist, revealed this.

The International Monetary Fund defines illicit financial flows as cross-border money transfers that are unlawful in their source (such as smuggling or corruption), transfer (such as tax evasion), or use (such as financing terrorism).

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The IMF has been a major player in global initiatives to stop these ambiguous and frequently destabilizing transfers for many years. Additionally, it has long been concerned about flows that are linked to tax avoidance but are not necessarily criminal.

According to Urama, stakeholders should concentrate on preventing the outflow rather than pursuing inflows because Africa was losing more foreign direct investment than it was gaining.

He said,

“There are so many things that happen on the continent that actually make corruption a big issue. And some estimations show that Africa loses about 248 billion US dollars every year due to corruption. If you add illicit financial flows of over $90bn and add profit shifting; corporates operating in Africa but then maybe have headquarters somewhere else and they find clever accounting ways of legally not paying taxes. In Africa, we are losing about $275bn. When you sum all these up, these are things you can trace through banks, then you find that Africa is losing about $587bn every year.

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“That’s about $1.61bn every day. Yet we spend all our time chasing FDI, foreign direct investment, official development assistance, portfolio flows and remittances. All these together during the year we did this study for 2022 was about $174.5bn. That’s less than three times, I mean what we are losing is three times more than what we are getting from the global market. So how do we engage with the global market? Are we not focusing on the wrong priorities? Because if you ask me if I’m losing almost $600bn, I will focus on how not to lose it instead of going to get more. Tackling it, is what we are doing.

Urama highlighted a number of strategies to stop the outflow, including the quality of institutions, accountability mechanisms for institutions, and the ability of public servants and government officials to not only comprehend the consequences of their actions but also to have the resources, rules, policies, and technology necessary to identify and stop it.

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CBN issues stern warning to banks

Legit.ng reported that the Central Bank of Nigeria (CBN) has issued a warning regarding potential repercussions for financial institutions involved in the illegal sale of dollars or unauthorised forex transactions.

The warning follows the unfortunate decline of the Nigerian currency, the naira, against the dollar at official and unofficial markets.

Folashodun Shonubi, the acting Governor of the CBN, conveyed this message while delivering a lecture titled "Diaspora Remittances and Nigerian Economic Development" in Abuja.

Source: Legit.ng