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Nigeria: Western economic domination and challenge of illicit financial outflows


In the late 1950s and early 1960s, when the struggles of colonial states in the continent started culminating in flag independence, the optimism of the civil populace focused on the symbolism of being free from political and racial domination. The colonial project, which saw the systematic subjugation of Africans within their territories, was driven by a racist superiority complex, which was enunciated as a mission to civilise the “backward” people of the continent. It was therefore not unexpected that nationalists struggles saw the political liberation of these African political spaces, with the attendant formation of new states as a serious blow to the very racist rationale for colonial domination.

The problem with this worldview was in the fact that it did not take fully into account the economic rationale for the colonial project. The racial pride and dignity precipitated by the achievement of flag independence did not allow for the interrogation of the economic content of the newly won independence. In the end, the euphoria of the independence decades had not sufficiently grappled with the realities of Africa’s hopeless dependence on the international capitalist system, which had been craftily designed, managed and was been manipulated by the metropolitan powers.

Having dominated and shaped the economies of its satellite states for over a century from the era of the slave trade to the point of colonial subjugation, European countries had craftily made exit arrangements to ensure that structural inequities remained to produce outcomes based on a strong relationship of perpetual economic dependence. The careful retention of economic structures, which reinforced dependence of the nascent post-colonial states on their former colonial masters was cemented by an international division of labour, which ensured new states were only producers of raw materials, while the metropolitan states held their preeminent positions as producers of finished goods. Interestingly, when the goods have been manufactured, economically dependent states become the ready markets.


As the contagion of military coups started undermining democratically elected governments in post-colonial states, a number of military juntas in the new states attempted to recalibrate the basis for economic relations. Nigeria fitted well into this category, as the activist regime of Murtala Mohammed boldly took on the multinational corporations. A few of the MNCs, including British Petroleum (BP) were nationalised. This was followed by the promulgation of an indigenisation decree, which sought to give Nigerians control and ownership of the country’s economy.

Attempts to reshape and restructure the international economic environment to address structural imbalances were scattered and far in-between. There was therefore no real impact or change; the result is that the predatory nature of international economic relations has remained much the same. In fact, the phenomenon of globalisation has further accentuated the economic imbalances, resulting in a situation where Africa continues to experience serious financial hemorrhage.

In fact, post-colonial states have continued to remain heavily impacted by the vagaries and unpredictability, and subtle designs of the international economic system. This is the historical context, which would shape the understanding and reading of a recent report on financial losses being suffered by Africa as a result of foreign control of mineral and oil riches.

The report by Health Poverty Action, an international non-governmental organization is titled: Honest Accounts? The True Story of Africa’s Billion Dollar Losses. It provides compelling data and research-based evidence to show that aid provided by the United Kingdom to Africa, only masks, and is dwarfed by the huge outflows from the continent. This is so because according to the report foreign companies listed on the London Stock Exchange control over $1t worth of Africa’s resources in five commodities – oil, gold, diamonds, coal and platinum.

The report notes that of these companies, 101 of them, mostly British control $305b worth of platinum, $276b worth of oil and $216b worth of coal at current market prices. By putting the spotlight on the foundational context for the poverty and human security crisis afflicting many post-colonial states on the continent, several decades after independence, the report takes the view that if the quantum of outflows out of the continent, including those which fall under the categorisation of Illicit Financial Flows (IFFs) are retained to provide critical services in the various countries, a lot would have been achieved in the areas of health, education, and human security.

In the forward to the report the authors point out that the amount Africa loses to the rest of the world, in comparison with what it receives in aid and other inflows, “is a response to a growing unease we have at Health Poverty Action that the UK public is not hearing the truth about our financial relationship with Africa. And hence what really needs to happen in order for global poverty to be tackled. We are guilty of presenting ourselves as generous benefactors to the world’s poor.

“We present the aid budget as an act of charity, of which the UK should be proud: there are people worse off than us so we are selflessly giving to support them year-after-year. And yet, what this report demonstrates quite clearly is that – in comparison with what it loses, the amount Africa receives back in aid is negligible. The truth is that rich nations take much more from Africa than they give in aid – including through tax dodging, debt repayments, brain drain, and the unfair costs of climate change – all of which rich nations benefit from.”

The report goes on to provide figures to explain its position on the financial lacerations being suffered by outflows from Africa, including IFFs. It points out for instance that while aid to Africa amounts to less than $30b per year, the continent is losing $192b annually in other resource flows, mainly to the same countries providing that aid.“This means African citizens are losing almost six and a half times what their countries receive in aid each year, or for every £100 given in aid, £640 is given back.” With respect to Nigeria, the details in the report point to the need for a lot more to be done in the area of combating losses of IFFs through tax dodging by multinational corporations (MNCs) and entities incorporated in tax havens.

According to anti-corruption analysts IFFs perpetrated by public officeholders stands at just five per cent, while the bulk of the IFFs are perpetrated by MNCs. It is therefore, critical that the anti-graft agencies begin to build the investigative capacity in those areas. This is important because it is only when the requisite capacity is built that the agencies would be able to trace and prosecute.

Similarly, there is the challenge of financial secrecy and how to get countries with policies that promote the use of tax havens by corporations to roll them back. This is an uphill task, which would require a persistent campaign to change attitudes and shift policies, especially in countries, which have weak political will to confront the issues. There is also the environmental dimension of the activities of many of the corporations. The agitations by oil-bearing communities over the despoliation of what used to be pristine aquatic habitat by corporations drilling for oil, calls for better governance. Proper governance of the environment would mean ensuring that no corporation explores mineral resources without doing the right thing, including Environmental Impact Assessments (EIA), as well as compensation of people, whose livelihoods are likely to be impacted.

For the Managing Director of Crane Securities Limited, Mike Ezeh, there is a very little remediation for the ongoing rape, unless the country embarks on massive acquisition of those relevant skills necessary for the possession of the know-how in those exclusive areas.“There is very little remediation in the circumstance under discussion. We all know that foreign countries have expertise in these areas, where professionalism rules. With the clamour for foreign direct investment and the positive fallouts therein, our governments do not really care about the negative implications of capital flight, environmental degradation, modern day slavery that are associated.

“However, we must begin to quickly look into how we can recover our economic freedom, which advanced countries have taken away from us through these means. How do we do this? Because, really, we cannot regurgitate those laws that drove them away in the first place, like the indigenisation decrees of those dark ages of the military rule and so on,” he said.

He pointed out that one of the fastest way out of the situation is, “we must embark on massive acquisition of those relevant skills necessary for the possession of the know-how in those exclusive areas. Again, laws must be put in place to checkmate foreigners who wish to engage in businesses related to these natural endowments. By doing so, our citizens would be accommodated, our environment will not be degraded, cannibalised, bastardised and capital flight will be moderately curtailed.

“And truly, you cannot retain your capital in totality when you open your doors for business after collapsing certain draconian legislations that scare away expatriates from coming to your country to do business. When you invite foreigners to come to do business in your country, you must put the relevant legal frameworks in place. They usually insist on this for fear of their capital been trapped in a foreign country. But if we get it right, it would help to regulate their own excesses,” he said.

Speaking on “Developing the solid minerals sector: Quick wins for the new government,” the Partner, Mining Sector Leader and Head Consulting at PricewaterhouseCoopers (PwC), Cyril Azobu, said a developed solid minerals sector can generate as much revenue as currently being generated from crude oil if adequate attention is given to its development.He emphasised the need for the Federal Government to encourage each state to invest in domiciled solid minerals either as sole investor, or in collaboration with private investors, with revenues accruing entirely to the state, and taxes and royalties accruing to the government.

He said that applying the derivation formula used in the oil and gas industry in sharing the tax and royalty revenues accruing from the development of the solid minerals sector will be a significant leap for the governments.“The development of the solid minerals sector is hampered by the lack of adequate funding to cater for the different stages of the lifecycle of a typical mining operation. Before returns can be generated from a mining operation, the activities need to go through the five stages of exploration, development, mining, processing and marketing- a cycle, which takes between two to 10 years or even more. Most mines in Nigeria are typically green fields, thus not necessarily attractive for funding by traditional commercial banks.

“There should be establishment of a solid mineral development bank that will provide investor friendly loans, specifically designed to cater for the various stages of the mining life cycle. These would have interest rates and repayment terms specifically designed around the mining lifecycle, making funding more accessible to miners, and repayment terms more reflective of the realities in the mining industry.

“Furthermore, the government can provide special incentives for solid mineral development banks, or commercial banks having special packages for the solid mineral sector,” he said.
He expressed dissatisfaction with the current level of foreign participation in the sector stressing that, “we have a lot more to do in this regard. A number of incentives have been put in place to help attract global mining companies including tax holidays, import duty exemptions, and even provision for 100 per cent foreign ownership of mining concerns. While this is commendable, other issues around security of mining sites and infrastructure need to also be addressed before we can get the level of foreign investment the sector needs to witness a boom. 

“Also, Nigerian mining companies need to make themselves more attractive to foreign investment and funding. This involves structuring their businesses and operations in line with global best practices. There is need for better financial record keeping and reporting, proper audits of financial statements, recruitment of the right resources, corporate governance, tax compliance, etc. This is one area with a large room for improvement, as the sector becomes more formal,” he stated.

He pointed out that the N5b fund put together by the SMDF and the BoI, which artisanal miners can access through the ministry by forming co-operatives, is a laudable idea. “We hope and expect that the initiative reaches the stakeholders it was meant for. Also private sector players should invest in niche areas of the mining life cycle, example laboratories for testing, machinery leasing, purification and delineation equipment etc. Artisanal miners working as corporative can access these. It will assist them realise more value for their mining activities before selling to traders of mined products.


Chairman, Lagos Chamber of Commerce and Industry (LCCI), Mining and Solid Minerals Group, Otunba Babatunde Alatise, maintained that there is need to amend the Minerals and Mining Act 2007, such that states can have the right to exploit their state-bound resources.

According to him, the amendment will create an enabling environment and encourage state governments to drive investment in minerals found in their respective territories.He called for a review of the Mining Act to make explicit and clear provision for accountability and transparency, as lack of accountability and transparency in the industry can lead to loss of government’s revenue to business operators and regulatory bodies.

He added that the issue of what should constitute a community agreement before mine development commences seems not clearly defined in the roadmap. Said he: “It is observed that the expectations of some communities and sub-national governments are not in tune with the provisions of the Mining Act. A truly independent regulatory mechanism is crucial for development in the mining sector. Such a regulatory mechanism should be independent of the Ministry of Solid Minerals in terms of finance, organisation and management to ensure there is less of government/political interference,” he said.

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