Managing Africa’s Natural Resources to Reduce Illicit Financial Flows

Mon, Feb 6, 2017
By publisher
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By Maureen Chigbo  |

AFRICA prides itself of being blessed with many natural resources. But the management and exploitation of these natural resources such as crude oil, gas, tin, coal, diamond, gold and other minerals have not yielded the desired results in engendering growth and development in the continent.  Revenues from the resources have equally not been invested in ways to reduce the army of the unemployed in the continent as  Kelvin Balogun, president Coca Cola, Central, East and West Africa, pointed out at the Africa Transformation Forum in Kigali, Rwanda, recently that half of 10 million graduates out of more than 668 universities in Africa have no jobs.

More worrisome is that illegal exploitation of the natural resources has led to illicit financial flows out of Africa. The illicit financial flows are worsened by weak governance which encourages individuals and companies involved in the sector not to be transparent in their activities and in paying the necessary taxes and royalties to the government.

Going by the United Nations Economic Commission for Africa statistics in 2012, the continent loses $50 billion annually to illicit financial flows. This is very significant against the background that Africa’s natural resources in export were worth $333 billion as at 2010. In addition, the amount Africa loses to illicit financial transaction is much more than the annual budget of some of the countries habouring more of its natural resources such as Nigeria, Angola, Ghana, Tanzania, South Africa etc. In the case of Nigeria, with a population of about 170 million people, its budget for 2017 is about N7.3trillion while that of 2016, is about N6.07 trillion. This is a country which also habours most of the natural resources in the sub-Saharan Africa but has not in any away stemmed the tide of illicit financial flows from the country due to weak governance structure and its inability to set laws that could help check illicit deals in the country.

For instance, in the oil and gas sector, Nigeria has been unable to pass its Petroleum Industry Bill which has been stranded in the National Assembly over the years. This has ensured opacity in the management of the oil sector. As it stands today, Nigerian government cannot comfortably state how much oil it is producing and exporting without relying on statistics provided by the multinational oil and gas companies. It is the same affliction that the country is suffering in other extractive industry sectors of the economy especially in mining.

According to Nigeria Extractive Industries Transparency Initiative, NEITI, report, the country lost billions of naira from the mining sector due to weak mining regulations and policies and inefficiency of government agencies that should be responsible for collection of royalties, taxes and levies from mining companies operating in Nigeria. Mineral titles in Nigeria are issued by the Mining Cadastre Office, MCO, to many companies, but only a few pay their annual fees and other fees as stated in the Nigerian Minerals and Mining Act, 2007. Royalty payments are supposed to be collected by the Mines Inspectorate Department, MID, on behalf of the federal government. It is, however, not clear if the mining companies are adhering with the stipulations of the Act.

For instance, a report by the NEITI and the Central Bank of Nigeria in 2012 stated that the total revenues from the solid minerals sector stood at N31.449billion.  The report said that at the beginning of the reconciliation, the total amount reported by the government entities of Nigeria from the solid minerals sector amounted to N49.759billion. However, it notes that that the total net difference between the amounts declared by reporting companies’ and those of the government entities amounted to N6,53 billion (13 per cent). “At the end of the reconciliation, a total amount of N27.560billion was reported to have been received by the government between January 1 and December 31, 2012. A net difference of N2bn (7.3 per cent) remained reconciled,” it said.

The hard lesson from the NEITI report is the need for the government to streamline the laws guiding the exploitation of its mineral resources and equip agencies supervising the sector effectively to monitor operators in the sector efficiently. This is why

Sani Shehu, president of the Miners Association of Nigeria, told The Guardian recently that until mining laws are adequately strengthened, the nation will continue to lose huge revenue to the companies which evade payment of royalties and other levies.

Just like what obtains in the oil and gas sector, Nigeria has no clear official records from the ministry of mines and steel development on the actual volume of minerals exported out of country. There have been complaints of inadequate funding of supervising ministry and agencies by the federal government to enable them do their jobs effectively.

It goes without saying that strengthening the natural resources governance in Nigeria and Africa in general will greatly reduce leakages in revenue accruing to the government. This will enable it to generate enough funds to invest in infrastructure like power to buoy the manufacturing sector, boost production, and create jobs to reduce the crippling unemployment situation in the country.  This is why the theme: “Natural Resource Governance in Africa” for the 6th Tana High-level Forum on Security in Africa schedule for April 23 and 23, 2017, is apt.

The hope is that African leaders attending the forum will come up with ideas to strengthen national laws and regulations governing the management of the natural resources to reduce illicit financial flows for the betterment of the majority of the populace in the continent. It will also serve as a forum to spread the gospel to investors who do business in Africa to comply with laws of the land and avoid illicit transactions.

Maureen Chigbo, Nigerian journalist and publisher/editor, Realnews Magazine Online, wrote this piece for the Tana Forum, Ethiopia.

—  Feb 6, 2017 @ 17:58 GMT

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