Vice President Osinbajo addressing the EITI conference. Sitting on the right side of the podium is Indonesian Minister of National Development Planning, Bambang Brodjonegoro

Vice President Yemi Osinbajo was on a two-day working visit to Indonesia last week where he spoke at the Extractive Industries Transparency Initiative (EITI) Beneficial Ownership Conference in Jakarta and also held high level meetings with Indonesian Vice President Jusuf Kalla, the Southeast Asian country’s business leaders, and African  ambassadors. Tokunbo Adedoja, who attended the meetings, reports 

 

For two days last week in Jakarta, Indonesia, Vice President Yemi Osinbajo engaged participants at the Extractive Industries Transparency Initiative (EITI) Beneficial Ownership Conference. And in separate meetings with Indonesian Vice President Jusuf Kalla, the country’s business leaders, and African diplomats, Osinbajo provided information on the huge opportunities for foreign investors in Nigeria.

Leading a high level delegation, which included Minister of Mines and Steel Development, Dr. Kayode Fayemi; Minister of State for Budget and Planning, Mrs. Zainab Ahmed; Executive Secretary of Nigeria Extractive Industries Transparency Initiative (NEITI), Mr. Waziri Adio; Senior Special Assistant to the Vice President on Media, Mr.  Laolu Akande; and some senior officials of the Nigerian National Petroleum Corporation (NNPC), Osinbajo gave a compelling account of the changing business environment under the current administration of President Muhammadu Buhari.

 

Cost of Secret Business Ventures 

At the Banquet hall of the Fairmont Jakarta, venue of the conference, where participants from EITI-member countries discussed the challenges of beneficial ownership reform, provided peer learning, and exchanged experiences, the vice president spoke on the dangers posed by hidden corporate ownership to Nigeria and other developing nations. Warning that opaque corporate beneficial ownership is an existential problem as secrecy provides convenient cover for criminals, Osinbajo, in his address at the opening session, cited a 2014 report by the One Campaign, titled the “One Trillion Dollar Scandal,” which claimed that developing countries lost $1 trillion annually to corporate transgressions – most of it traceable to the activities of companies with secret ownership.

The vice president also quoted a 2015 report of the High Level Panel on Illicit Financial Flows from Africa, chaired by former South African President Thambo Mbeki, which noted that Africa had lost over $1 trillion over a 50-year period and lost more than $50 billion annually to illicit financial flows.

 He said, “Masked or hidden corporate ownership is deeply implicated in the sad story of our underdevelopment.”

Noting that most of these illicit flows are perpetrated in the extractive sector and through companies with hidden ownership, the vice president said, “So for us in the developing world and especially in Africa, breaking the wall of secret corporate ownership is an existential matter. It is for us literarily a matter of life and death.”

He, however, agreed that while anonymous companies were not always illegal or not always designed to harm, the secrecy around their ownership provided a convenient cover for criminals and corrupt individuals.

“Our lived experience has shown clearly that anonymous corporate ownership could serve as vehicles for masking conflicts of interest, corruption, tax evasion, money laundering, and even terrorism financing,” he said.

The vice president said, “Nigeria is still grappling with the negative consequences of the use of opacity by senior members of government and their cronies between 1993 and 1998, awarding themselves juicy contracts in the extractive industry. One of such incidents involving a company called Malabu Oil and Gas has been and is still subject of criminal and civil proceedings in many parts of the world involving huge legal costs while the full benefit of the natural resource remains unexploited for the benefit of the people of Nigeria to which it belongs,“ he said.

He called for global efforts to tackle the problem of hidden corporate beneficial ownership, stating that this is not just a problem of the developing world.

“We live in a more inter-connected world, and anonymous companies have footprints and tentacles that do not respect the developed/developing divide,” the vice president stated.

He added that even when the degree of exposure may differ, the whole world was at risk of the dangers posed by anonymous corporate ownership, noting that the Panama Papers clearly illustrate the global scale and spread of this problem. Osinbajo described this as a global challenge and called for a truly global approach to tackle it. He commended the United Kingdom, Norway, Netherlands and Denmark for leading the way in establishing public registers of the real, human owners of companies in their countries and called on other G8 and G20 countries to follow suit by initiating actions to end corporate secrecy at home and also in their dependencies.

“It is important to underscore the fact that opacity in one section of the globe undermines openness in the other. We need to break down this wall together as we are all at risk of the evil effects of opacity in business ownership.”

Osinbajo lauded Open Ownership and its partners for establishing a global register of beneficial ownership with entries on about two million companies. He noted that current legislative measures in those countries might need to go farther, to effectively discourage or totally prohibit non-disclosure agreements with big corporates and re-evaluate the use of secret trusts to hide beneficial ownership from the prying eyes of the law.

He observed that laws passed in some very developed countries did not go far enough to set the examples really needed, as they did not cover territories and dependencies where most of the stolen assets from developed countries end up.

According to him, while governments and citizens stand to benefit from increased revenues, better law enforcement in this area should improve citizens’ welfare as a result of more ownership transparency.

He, however, warned that care must be taken not to frame the campaign as a zero-sum between society and business, adding, “Legitimate businesses benefit not only from the better business climate that results when governments better serve their citizens but also from knowing who they are doing businesses with or competing against, they benefit from a level playing field, lower costs of doing business, and from reduced reputational risks.”

 

Corporate Beneficial Ownership in Nigeria

 Osinbajo recalled that Nigeria was one of the first set of countries to join the EITI, one of the 12 EITI-implementing countries that piloted beneficial ownership disclosure, and one of the few countries that have disclosed beneficial ownership details in three audit reports. He said through NEITI, a comprehensive roadmap that would culminate in the establishment of the register of beneficial owners of companies operating in the country’s extractive sector had been published.

He said  Nigeria was taking the initiative beyond the extractive sector, citing the commitment Buhari made at the May 2016 London Anti-Corruption Summit to establish a public register of the beneficial owners of all companies operating in the country.

According to the vice president, “In December 2016, Nigeria joined the Open Government Partnership (OGP) and submitted a National Action Plan that prioritises the establishment of this all-encompassing and publicly accessible register. These are commitments that we made with all sense of seriousness.  They are commitments that we made not because we are seeking applause or commendation, but because we are convinced they are in our best interests.

“To further reinforce our determination by our course of actions, we presented a draft Money Laundering Prevention and Prohibition Bill to the National Assembly in 2016.  The 2016 draft Money Laundering (Prohibition) (Amendment) Act attempts to cure the deficiency of the 2011 Act, Money Laundering (Prohibition) (Amendment) Act No. 11, 2011, to bring it in line with the FATF standards, and it contains robust provisions on removing the barriers to full beneficial ownership disclosure in our laws.”

 

National Priority

 Speaking during one of the panel discussions at the conference, Fayemi said beneficial ownership disclosure was critical to Nigeria’s national priorities. He aligned it with the electoral mandate of the Buhari administration, which is to fight corruption, tackle insecurity, and grow the economy.

Recalling the president’s commitment to the establishment of a central public register of company beneficial ownership information, and Nigeria’s membership of the Open Government Partnership (OGP), the minister said Nigeria had made “the establishment of an all-encompassing register of company owners the centrepiece of our national action plan.”

He noted that Nigeria’s commitment to both the EITI and OGP processes was strong and unwavering, stressing that the country has two reinforcing commitments on ownership disclosure – the beneficial ownership register for the extractive sector as an EITI-implementing country and the beneficial ownership register for all companies doing business in Nigeria under OGP.

Fayemi said: “We are starting with the extractive sector because it is our most strategic sector and is a sector already exposed to revenue and ownership reporting. Our national EITI, which I chair, was part of the EITI pilot on beneficial ownership disclosure and has featured beneficial ownership information in the last three audit reports.

“Also, a roadmap for beneficial ownership disclosure in the extractive sector had been developed through a consultative process and is already being implemented. But it is our considered view that to have the desired impact we need to go beyond just one sector, no matter how strategic and ready that sector is. Without mainstream ownership disclosure, hidden ownership with all its harmful baggage will just move to uncovered grounds. This was why we decided to cover all sectors and all companies.”

The minister said while NEITI was taking the lead on the extractive sector register, the Corporate Affairs Commission (CAC) was taking the lead on establishing the all-encompassing register.

According to him, the extractive register will eventually become part of the wider register while the experience gathered in implementing it would be useful for the second phase, which is the all-encompassing register.

Noting that the major challenge is that there is no law that mandates the disclosure of more than the legal owners of companies operating in Nigeria, he said there were existing reforms or initiatives that could help unveil beneficial owners of companies in the country. These, according to him, include the mandatory asset declarations by all public officials, the Freedom of Information Act, the anti-money laundering law, and the bank verification numbers, among others. He, however, said these initiatives could only be complementary instruments, as clear legislation would still be needed.

Not oblivious of the fact that it takes a while to pass legislation, Fayemi said NEITI was working with other institutions to explore two interim options, namely, subsidiary legislations by regulators and an executive order on beneficial ownership disclosure. He added that the process of repealing the Companies Act to include express provisions on beneficial ownership disclosure had commenced.

“Additionally, structured consultations are on-going among critical stakeholders on what to capture in the register(s), the levels of access, technology needs, who will host the register(s), how to validate entries, how to sensitise stakeholders, capacity building for media and civil society, funding needs and other operational issues.”

 

Challenge 

Ahmed, speaking in one of the sessions, emphasised the need for disclosure of companies’ beneficial owners. She said Nigeria had a tax to GDP ratio of 5%, adding that if the current efforts channelled towards disclosure of companies’ beneficial owners are successful, it can unlock more tax revenue. She was responding to questions from participants on the challenges facing Nigeria as regards beneficial ownership.

The minister said lack of official record of beneficial business owners was a major challenge faced by government. She noted that though it was unlawful in Nigeria for government officials to own businesses, some government officials still found a way to circumvent that law.

“That is an issue that has been a challenge because government officials still own businesses and you cannot find any official record of such ownership by government officials. Sometimes even when you enter a taxi, the taxi driver may point at a hotel and say this is owned by one government official, but you won’t find that in any official record.”

She said in some instances stakes in companies were under-declared, citing an instance where a person that had the least percentage holding in a company was the actual owner of that company.

 Marketing Nigeria 

On the sidelines of the conference, Osinbajo met with the Indonesian business leaders, where he highlighted the incentives initiated by government for investors and urged them to take advantage of the immense opportunities in the Nigerian economy.

Speaking to the business leaders under the auspices of the Indonesian Chamber of Commerce and Industry, Osinbajo said some of the incentives introduced by the Nigerian government to attract investors and improve the business environment included approval of pioneer status for some categories of companies; establishment of special economic zones; opening up of marginal oil fields; investment in infrastructure; and efforts at increasing foreign exchange availability through the NIFEX window.

Stressing the need for Indonesian companies to increase their investment portfolios in Nigeria, particularly in the manufacturing as well as oil and gas sectors, because of the incentives available in those areas, he also gave an overview of on-going projects in Nigeria and called for collaborations between Indonesian and Nigerian businesses. He listed railway development as one of such areas, adding, “Nigeria would need a rolling stock in its railway revitalisation project.”

 

Declining Trade 

Some members of the Indonesian Chamber of Commerce and Industry who spoke at the meeting expressed interests in the railway, aviation, agriculture and foods sectors. They also expressed concern about the declining value of the Indonesia-Nigeria trade, which currently stands at $1.70 billion from $3.18 billion in 2012. Emphasising the need for both countries to work on reversing the slide, Chairman of the Indonesian Chamber of Commerce and Industry, Mr Rosan Roeslani, said, “Being the 15th largest economy in the world, Indonesia, through its investors, is desirous of increasing its portfolios to levels that justify Nigeria’s position as the Asian country’s biggest trading partner in Africa.’’

He noted that Osinbajo’s visit to Indonesia and his meeting with the business leaders were strong indications that Nigeria was ready to take her pride of place among Indonesia’s biggest trading partners in the world.

Chief Executive Officer of Indonesian Eximbank, Shintya Roesly, who was also at the meeting, expressed the bank’s readiness to support trade relations between both countries through financing of import and export activities with a view to boosting the balance of trade between the two countries. She called for the creation of a roadmap and establishment of a working group with timelines to enhance trade development between Indonesia and Nigeria.

Representative of Pertamina, Indonesian state-owned oil and natural gas corporation,  Mr. Daniel Purba, said the company had already opened discussions with stakeholders in Nigeria’s oil and gas industry with a view to investing in upstream assets.

 

Parley with African Envoys 

Osinbajo also had an interactive session with the Committee of African Ambassadors to Indonesia, led by the Dean of the group, Ms. Alice Mageza of Zimbabwe. Present at the meeting were ambassadors of Egypt, Ethiopia, Algeria, Libya, Morocco, Mozambique, Somalia, South Africa, Sudan, and Tunisia.

Addressing the envoys, Osinbajo noted that Africa had huge potential but it must reposition its economy in the direction that would be attractive to investors.

“The way that such investments will go will depend on the advantages that the investors get from investing in such economies,” he said, adding, “We in Africa must prepare our economies in that direction that attracts such huge and qualitative investments. It is for us to push and we must push.”

Osinbajo said Africa’s poor economic indices of lowest integration statistics and lowest GDP ratio could only be reversed by preparing the continent for quality investments that would benefit the people. He urged the envoys to work together to attract the needed investments to the continent.

 Emphasising the need for the continent to focus its investment drive on the manufacturing sector, the vice president said, “The most important thing for Africa is that whoever wants to invest in our countries should start in the manufacturing sector.”

 

Nigeria-Indonesia Economic Cooperation 

One of the highlights of the visit was the meeting between Osinbajo and his Indonesian counterpart, Jusuf Kalla, at the end of which both leaders expressed their countries’ readiness for more economic cooperation. Osinbajo said Nigeria was open for business and more investment.

While informing Kalla that the Buhari administration has implemented reforms that have made the Nigerian business environment more favourable, Osinbajo said, “We are looking forward to more Indonesian investments, especially in the manufacturing sector in Nigeria, trying to exploit our local raw materials.”

Other issues discussed by the two vice presidents included how both countries could collaborate more in the agriculture and agro-allied sector, and also in palm oil research and production.

Both countries agreed to work together to strengthen economic ties.