Panama papers: How offshore accounts could hurt Nigerian economy

• ‘Funds May Be From Unimplemented Budgets’
• Jobs, Roads, Tax, Others Were Shipped Overseas, Say Experts

In what is perhaps the most far-reaching collaboration of journalists to uncover the dark alleys of international financial deals, a coalition of media outlets and their staff have investigated and leaked 11 million files last week, exposing the intricate web of how the high and mighty hide their dealings in offshore companies.

The files contain papers that date back four decades and are linked to a Panama-based law firm, Mossack Fonseca reputed to have expertise in helping global power brokers to set up and manage offshore accounts and shell companies, which are vehicles for financial maneuvers and deals.

Drawing from scoops from Germany’s Suddeutsche Zeitung, the International Consortium of Investigative Journalists (ICIJ), working with other media outlets, including Nigeria’s Premium Times, first published the leaks and named close associates of Russian President, Vladimir Putin, in a roll call that later included Nigerian politicians and businessmen.

But even as experts caution that shell companies may not necessarily be used to siphon funds, many contend that the scale of the dealings and the moral question it poses for world leaders alleged to have set up these accounts speak to issues of transparency, capital flight, tax avoidance and evasion, and need to build structures to check capital flow.

The funds allegedly stashed away—some amounting to about $60m— would have gone a long way in building needed infrastructure and creating jobs in countries battling underdevelopment, experts argue, alleging they may have been proceeds from unimplemented projects.

The revelations also raise concerns of the commitment of the ethos of democracy and development by leaders, as well as, question the efficacy and efficiency of Nigeria’s Code of Conduct Act, which mandates public officials to declare their assets when they assume and as they leave office.

Associate Professor of Economics and policy analyst at the Department of Economics at the University of Lagos (UNILAG), Femi Saibu, said aside issues of capital flight, the revelations expose how people are creating jobs and financing investments in other countries and denying the local economy of necessary resources.

He said that if the monies were invested in the country, it would have increased the standard of living of the people in Nigeria, adding, “It also explains why we have lesser resources in the country. This money would have come from government funds, especially budgets that were not implemented. Hence, what would have been spent on the economy is lost.”

For PhD candidate in the Department of Economics at the University of Benin (UNIBEN), Arodoye Nosakhare, the tax dimensions of the leaks should get authorities on their toes, so that they can go after those who may have ‘robbed’ Nigeria.

“Tax is a legal issue, not some moral or political matter. If you don’t pay tax, it is assumed that you have committed a criminal offence. Even though Nigeria has issues with tax administration and compliance, it is a crime to default.

“When people take their money through legitimate means outside the country to other countries it is known as capital flow. But when it is done illegally, it is capital flight. They are taking the money away from a resource scares nation to a resource rich nation in a manner of speaking.

“If one takes money from Nigeria to the United States or even to South Africa, it badly impacts on the economy. But government should consider why people are taking this money away. If the money is going through legitimate channels, the people are well within their rights. But if not, government has to look into it.

Policy Analyst, Opeyemi Agbaje, said that though ordinarily, having a foreign account is not a crime, but the Nigerian constitution and the Code of Code Act prohibits public office holders from operating foreign accounts, at least while they are in public office.

Tax is a legal issue, not some moral or political matter. If you don’t pay tax, it is assumed that you have committed a criminal offence. Even though Nigeria has issues with tax administration and compliance, it is a crime to default. If one takes money from Nigeria to the United States or even to South Africa, it badly impacts on the economy. But government should consider why people are taking this money away. If the money is going through legitimate channels, the people are well within their rights. But if not, government has to look into it.

According to him, “the Code of Conduct Act requires them to declare all such accounts, including the amount, properties, shares, cash and foreign currency they have.

“The first issue this would raise is that, were these things declared within the period when these gentlemen and ladies if any, were in public office? Did they declare the investments, money, share and anything held under those shell companies?”

On dimensions of corruption the leaks pose, he said that the actions show how corruption has denied Nigeria of resources, as the monies stashed overseas are a complete loss to the Nigerian people.

“The money should have been used to build roads, schools, rails and other infrastructure for Nigerians. The money is stolen, that is the first crime. The other crime is that the money is put abroad in another economy, where it does not work for the Nigerian people. Perhaps, if the money was stolen and kept within the Nigerian system, it would have been invested in businesses and created jobs. With that, it would not be a total loss to the Nigerian people. But the way this variant of corruption has been packaged, the transactions are a complete loss to our people.

“The third issue is that of taxation. There is no revenue and that is why we have a very low rate of tax collection because there are significant leakages through government budget, corruption and the subsequent income is not taxable.

“For instance, if a contract was awarded and executed, the contractor would pay tax on it. If there was a school and the school was admitting students, perhaps there would be economic impact of that school. So, it is just a total loss,” he said.

Agbaje urged government to obtain the comprehensive list of those involved and ensure to investigate and substantiate the claims, urging that law enforcement agencies should be equipped with tools and expertise to deal with the peculiar nature of the crimes, especially on forensic investigations to identify proxies. He added that since the leaks expose a global network of crime, efforts should be made to integrate efforts on a global scale for a more impactful action against those who are eventually indicted.

“I believe we have to investigate the panama papers issue. This should not only be the ones that have been exposed; we should have a comprehensive list on Nigerians or contractors from Nigeria who are implicated. We should get details of the transactions and what can they be prosecuted for, if any crime has been committed.

“In cases where some of those implicated are not public office holders, we should take on the tax side of it. Is there any tax that a businessman has hidden away because he has kept those transactions out of the reach of the Nigerian tax authority? So if you are a businessman, the Federal Inland Revenue Service (FIRS) should be interested in all the questions,” he said.

On the need for global collaboration like the one used in obtaining the leaks, he said, “The Nigerian government alone cannot solve this issue; there has to be a global approach. Luckily, the United States government has shown interest in the issue to ensure reforms in this area of global tax management.

“There are global initiatives that have to be taken. We also have to look at it as a country. We should look at what laws we would have to put in place in relation to this global tax issue. It would require a detailed study to determine what is legal and illegal and then fashion out a Nigerian legal and tax response to the issue.

“The law has always included the wives, children and any proxies. For instance, the Code of Conduct Act includes the wives, children and such related persons of politically exposed persons. It is not about law; it is about enforcement and compliance, as well as, the EFCC, CCB, ICPC and the Police having the tools and competencies to go after the individuals and proxies in whose name assets were acquired.

“If the investigating authorities acquire the right forensic tools, they can detect the trail. That money would have gone from the main culprit. If the money is in the name of the proxy, if the concerned agencies have the skills and the infrastructure, it would be established that the assets where acquired through a proxy. Those are the competencies that are required.

“But in the case of Nigeria, there is a law that public office holders must declare their assets and if they didn’t do so, then we can call it an indictment when the facts have been established.”

On the possibility of those named stepping down from office like the Prime Minister of Iceland did, Agbaje said, “They might not resign and that confirms that we don’t have a system that is based on accountability to the people and morality. It demonstrates the fact that our democracy is still yet to develop to a point where you are held accountable for your action. And once there is a whiff of impropriety, you have to resign.”

Public Analyst, Wilfred Oyegun, believes that if the money can be recovered, it would be a boost for every local economy that has been deprived such funds, noting that on the larger side, the Panama papers episode appears to be some kind of global conspiracy by people who believe that they have the world in their pocket and that they are able to do and undo and disregard the laws of the land.

“Each of the people named are from different countries and I do not know any of those countries to be lawless, where there is no constitution or absence of law and order. It is an act of impunity. We have been talking about impunity in Nigeria; this is an act of global impunity. These are people who think they can do just about anything and get away with it. It is unacceptable.

“This act is the main reason for poverty in many countries. Citizens in every country want to work, but they have to have jobs created before people can be employed. Because there are no jobs and employment, many families are suffering and can’t feed,” he said.

On the need for prosecution, he said, “It is a combination of tax avoidance and evasion. A good number of these people are liable to prosecution because they have avoided the tax laws of the land and have evaded paying tax to the land. Therefore, they have deprived local economies monies needed to develop them.”