Illicit Financial Flows Threaten Nigeria’s Fiscal Stability, Says FIRS Chairman
By Patience Ikpeme
The volume of illicit financial flows (IFFs) draining out of Nigeria poses a significant threat to the nation’s fiscal stability, according to Dr. Zacch Adedeji, the Chairman of the Federal Inland Revenue Service (FIRS).
Dr. Adedeji voiced this concern at the opening of a two-day national conference on IFFs, organized by the FIRS with the theme “Combating IFFs: Strengthening Nigeria’s Domestic Resource Mobilisation,” held at the Transcorp Hilton in Abuja.
In his address, Dr. Adedeji stated that “The scale of these flows, especially through aggressive tax avoidance by multinationals exploiting opaque global arrangements, continues to threaten Nigeria’s fiscal stability.”
He called upon participants, drawn from both within and outside the country, to foster constructive collaboration at the conference to halt IFFs and consequently revitalize Nigeria’s fiscal landscape. He explained that illicit financial flows, encompassing tax evasion, profit shifting, money laundering, and trade mis-invoicing, are not merely financial wrongdoings but constitute a “structural drain” on the economy.
This drain, he added, deprives Nigeria of the crucial resources needed for inclusive development. “Each unaccounted dollar undermines governance, erodes trust, and translates into lost infrastructure, inadequate public services, and deepening inequality,” he observed.
He further pointed out that “Like many other resource-constrained nations, we lose billions annually through these illicit conduits—making this conference not just a policy dialogue, but a national imperative.”
Dr. Adedeji also shed light on the current administration’s commitment to fiscal reform, noting that under President Bola Tinubu’s Renewed Hope Agenda, Nigeria has entered a new era. The recent assent to four tax reform bills on June 26, 2025, serves as a clear indication of this administration’s resolve to overhaul the tax system, modernize the legal framework, and institutionalize transparency in revenue collection.
He cautioned that legal reform alone is merely a starting point, necessitating reinforced enforcement, optimized digital compliance, and the cultivation of public trust through fairness, predictability, and strategic communication to fully deliver on its promise.
The FIRS, he confirmed, is responding with a deliberate, multi-dimensional strategy. Firstly, it champions voluntary compliance by promoting taxpayer education and simplifying systems, aiming to cultivate a culture where compliance is driven by trust rather than fear.
Secondly, the service is harnessing technology and intelligence through an ambitious digital transformation program, which includes the establishment of a Tax Intelligence and Automation Department. This initiative seeks to build a proactive, smart, and secure tax system utilizing real-time analytics, integrated third-party data, and anomaly detection, thereby moving beyond mere digital infrastructure to digital vigilance.
Thirdly, Dr. Adedeji acknowledged that combating IFFs requires collective action. As the designated coordinating agency under the Proceeds of Crime Act (2022), the FIRS has established the Proceeds of Crime Management and Illicit Financial Flows Coordination Directorate. This unit is tasked with leading implementation efforts, supporting asset recovery, and coordinating closely with law enforcement agencies, the judiciary, private sector actors, and international development partners.
In her remarks, Honorable Irene Ovonji-Odida, a Ugandan lawyer and member of the Thabo Mbeki High Level Panel on IFFs from Africa, detailed the challenges facing the continent in addressing these flows.
These challenges include the need to strengthen Africa’s capacity and coordination, as well as to establish global coherence for agreements reached by African nations.
She stated that estimates of IFFs from Africa have cumulatively grown to approximately $1 trillion over the past 50 years, with West Africa, including Nigeria as a crucial component, and North Africa collectively losing about $407 billion from trade mis-invoicing over a decade.
The rights activist further indicated that tax avoidance through commercial activities accounts for 65 per cent of IFFs, while criminal activities are responsible for 30 per cent, and corruption, through bribery of government officials, contributes five per cent.
Ovonji-Odida also accused Western powers of complicity in IFFs from Africa, citing their role in shaping the rules of key sectors which she described as often “opaque and unaccountable.”
She argued that the systems of key professions such as Law, Accounting, Audit, Banking, and other financial sectors are derived from Global North countries, and by shaping the very ethos and rules of important actors within national and global economies, they further entrench the overall Western orientation of the global economic and financial systems.
Ovonji-Odida suggested that Africa needs to continue to develop its common negotiating position on global tax reform and, through South-South cooperation, build a global South position within the United Nations negotiation process.
The Minister of State for Finance, Dr. Doris Uzoka-Anite, who chaired the conference, emphasized the critical need to protect and retain the wealth generated within the country’s borders.
She revealed that Nigeria is estimated to lose $18 billion annually to IFFs due to profit shifting and aggressive tax avoidance practices by some multinational corporations operating in the country.
Uzoka-Anite explained that these significant sums transferred out of the country strip it of resources that could be utilized to finance much-needed public services. The Minister expressed concern that many foreign companies operating in Nigeria are not paying adequate taxes and that many existing international tax treaties do not presently reflect Nigeria’s renewed resolve for tax equity.
This, she affirmed, needs to change. She called for these treaties to be brought into conformity with Nigeria’s current economic realities, the new tax reforms, and a move towards greater tax equity between the global North and global South.
While recognizing the recent tax laws as a demonstration of President Tinubu’s commitment to fiscal reforms, the Minister called for a strong alignment of policy and enforcement across agencies, stating that laws alone would not suffice. She also commended the FIRS for leveraging technology to enhance its operational capacity, thereby making it increasingly challenging for companies and individuals to manipulate financial records or conceal taxable income.
In his goodwill message, the Comptroller General of Customs, Bashir Adeniyi, recounted an instance where the agency impounded $8.3 million that was about to be taken out of the country.
He noted that the Financial Action Task Force (FATF), a global anti-money laundering and terror financing body, reacted by stating its greater interest in money entering Nigeria and leaving the country.
Mr. Adeniyi explained that Customs’ daily enforcement efforts aim to prevent the 30 per cent contribution of criminal activities to IFFs from escalating to 50 per cent or more. He detailed the agency’s monitoring of illegal cross-border movements of finance, whether in cash or other instruments, adding that there is a protocol requiring the declaration of cash exceeding a certain threshold.
He considered the conference timely, especially as Nigeria prepares to host the FATF for an assessment of its readiness. Mr. Adeniyi stated that a “whole of society approach” is essential due to the complexity of IFFs, necessitating collaborative efforts among Customs, tax authorities, enforcement agencies like the EFCC, and other relevant bodies.
He identified illegal mining and the proceeds crossing borders as a significant problem in Nigeria, acknowledging the assistance of the United Nations Office on Drugs and Crime (UNODC), which also participated in the conference.
The Customs boss reiterated the peculiar reaction from FATF regarding the $8.3 million seizure at Lagos Airport, where they were more concerned about the “inward movement of cash,” a question that, to date, remains without a clear answer.
