By Emeka Umejei Reporter,Lagos – Nigeria has been named By US-based Global Financial Integrity in its annual analysis report on cost of crime, corruption and trade mispricing as the leading African country among top 10 countries involved in illicit financial outflows from Developing countries between 2008 – 2009.
The report entitled, “Illicit Financial Flows from Developing Countries: 2000-2009,” disclosed that a whopping $6.5 trillion was removed from the developing world from 2000 through 2008 with Nigeria accounting for $130bn.
The report released on january 18 ranks countries according to magnitude of outflows with China lead other Nine countries with $2.18 trillion, Russia 2 ($427 billion), Mexico 3 ($416 billion), Saudi Arabia 4 ($302 billion), and Malaysia 5 ($291 billion), 6.United Arab Emirates: $276 billion 7.Kuwait($242 billion), 8.Venezuela($157 billion),9.Qatar($138 billion) and Nigeria( $130 billion).
The report also shows the annual outflows for each country and breaks outflows down into two categories of drivers: trade mispricing and “other,” which includes kickbacks, bribes, embezzlement, and other forms of official corruption.
“Every year developing countries are losing ten times the amount of Official Development Assistance (ODA) remitted for poverty alleviation and economic development,” said GFI director Raymond Baker. “This report measures the quantity and pattern of these harmful outflows and provides stark proof of the impact of these illicit financial practices.”
According to the report, Illicit outflows increased from $1.06 trillion in 2006 to approximately $1.26 trillion in 2008, with average annual illicit outflows from developing countries averaging $725 billion to $810 billion, per year, over the 2000-2008 time period measured.
Illicit flows increased in current dollar terms by 18.0 percent per annum from $369.3 billion at the start of the decade to $1.26 trillion in 2008. When adjusted for inflation, the real growth of such outflows was 12.7 percent.
Analyzing illicit flow by regions, the report disclosed real growth of illicit flows as follows; Middle East and North Africa (MENA) 24.3 percent; developing Europe 23.1 percent; Africa 21.9 percent; Asia 7.85, and Western Hemisphere 5.18 percent.
Asia accounted for 44.4 percent of total illicit flows from the developing world followed by Middle East and North Africa (17.9 percent), developing Europe (17.8 percent), Western Hemisphere (15.4 percent), and Africa (4.5 percent).
Trade mispricing was found to account for an average of 54.7 percent of cumulative illicit flows from developing countries over the period 2000-2008 and is the major channel for the transfer of illicit capital from China.
The report emphasised that bribery, theft, kickbacks, and tax evasion were the greatest conduit for the illicit financial flows from the major exporters of oil such as Kuwait, Nigeria, Qatar, Russia, Saudi Arabia, the United Arab Emirates, and Venezuela.
Stating further, it noted that Oil exporting countries, like Russia, the United Arab Emirates, Kuwait, and Nigeria, are becoming more important as sources of illicit capital. According to the report, illicit outflows through trade mispricing grew faster in the case of Africa (28.8 percent per annum) than anywhere else, possibly due to weaker customs monitoring and enforcement regimes.
“ Apart from differences in the extent to which major exporters of illicit capital drive such flows from developing countries, the conduit for the transfer of these funds also varies. For instance, while trade mispricing is the major channel for the transfer of illicit capital from China, the balance of payments (captured by the World Bank Residual or CED–change in external debt–model) is the major conduit for theunrecorded transfer of capital from the major exporters of oil such as Kuwait, Nigeria, Qatar, Russia, Saudi Arabia, the United Arab Emirates, and Venezuela,” The Washington DC-based GFI stated in the report.
“Mexico is the only oil exporter where trade mispricing is the preferred method of transferring illicit capital abroad while Malaysia is the only country where the corrupt use roughly comparable portions of both channels (CED and GER) to transfer such capital.”
Concluding, GFI projected a slowdown in illicit financial outflows due to what it describes as decline in trade mispricing resulting from a slowdown in world trade in the wake of global financial crisis.