- Moves against illicit financial flowsÂ Â Africa loses $80bn annually
By Obinna Chima, Bayo Akinloye with agency report
The World Bank has approved a $486 million credit facility to Nigeria for electricity grid improvements, the lender said yesterday.
â€œThe investments under the Nigeria Electricity Transmission Project will increase the power transfer capacity of the transmission network and enable distribution companies to supply consumers with additional power,â€ Reuters quoted the World Bank to have said.
Nigeriaâ€™s dilapidated power sector is often criticised by economists for holding back the countryâ€™s economic growth. Businesses and households are subject to frequent blackouts, and many depend on their own generators that are expensive to run.
A recent report had pointed out that ineffective metering was a major problem to the success of power sector reforms in Nigeria, a report has stated.
The report by Lagos-based CSL Stockbrokers Limited, noted that some consumers avoid paying for power consumed through meter bypass, while others are made to pay for what they havenâ€™t consumed through estimated billing by the distribution companies (discos).
The report cited a new draft meter regulation proposed by the Nigerian Electricity Regulatory Commission (NERC), which stated that electricity customers can now acquire meters under a 15-year lease facility from the discos guaranteed by third party meter providers.
It recalled that NERC had proposed a business model for the licensing of Meter Services Providers (MSP) who would provide for the financing, procurement, installation, maintenance and replacement of electronic prepaid meters for end-users of electricity.
According to the document, customers would make payments to MSPs through the collection account of the discos or through the vending platform for all meters supplied by the providers.
According to a report published by NERC on its website, out of 7,476,856 total number of registered customers as at August 2017, only 3,451,611 (46%) were metered.
Therefore, CSL noted that, with this development, Nigerians, who previously did not pay for meters (at least on paper) would now pay for their own their meters and would not be allowed to remove them when moving houses. â€œWe believe NERC is going this way, as previous efforts to ensure adequate metering have all failed.
â€œIneffective metering remains a major drawback to the success of power sector reforms in Nigeria.
â€œWhile some consumers avoid paying for power consumed through meter bypass, some other consumers are made to pay for what they havenâ€™t consumed through estimated billing by discos. Discos have been largely unsuccessful with metering their customers,â€ it added.
The report stressed that effective metering view would be a step ahead in solving the myriad of problems embattling the Nigerian power sector.
â€œThough previously supposed to be unpaid for, many end customers in a bid to avoid the bureaucracy associated with getting meters have paid N50,000-60,000 (US$138.9-166.7) to get their own meters.
â€œIf by this draft regulation, getting meters can become a seamless process and less cost heavy (as payments are to be made piecemeal over the 15-year period of the lease), we believe it may enjoy some level of success,â€ it added.
Nigeria and global organisations, including the Organisation for Economic Cooperation and Development (OECD) and the World Bank Group, have agreed on high-level collaborations with other African countries to check Illicit Financial Flows (IFFs) in Africa.
The African continent reportedly loses about $80 billion annually to illicit financial flows
A major resolution reached at the ongoing Platform for Collaboration on Tax (PCT) Conference in New York is that Nigeria and global organisations, including OECD and the World Bank Group, have agreed on high-level collaborations with other African countries to check IFFs in Africa.
The Head of OECD Global Forum on Exchange of Information, Ms. Monica Bhatia, who disclosed this at the PCT Conference, stated that automatic information sharing had been adopted as part of proactive steps to curtail the IFFs from the African continent to developed countries..
â€œThe Sustainable Development Goals (SDGs) specifically says that we must significantly reduce illicit financial flows by the year 2030. A lot of efforts are ongoing to achieve this and support developing countries to end the IFFs,â€ Bhatia said.
A statement issued by Mr. Oluyinka Akintunde, spokesman of the Minister of Finance, Kemi Adeosun, quoted her as affirming, in her address at the conference, that the IFFs are problems that urgently require global focus and actions towards the realisation of significant developmental progress for Nigeria and other developing countries.
Adeosun said: â€œThe IFFs are driven by the desire to hide illicit wealth, hide the proceeds away from the public eye and law enforcement agencies and also conceal the ways and means by which illicit wealth was created. This makes it difficult to trace the associated money flow.
â€œDeveloping countries, including Nigeria, collect significantly lower levels of tax, as a percentage of Gross Domestic Product (GDP), than wealthier states. This is partly because the income and wealth being created, is taken out of the country illegally, without being taxed.â€Â
Quoting the report of former South African President, Thabo Mbekiâ€™s High-Level Panel on IFFs, the minister said Africa loses US$80 billion annually to IFFs, with a significant percentage of the loss coming from Nigeria.
She disclosed that the Nigerian government had engaged a leading international Asset Tracing and Investigation Agency (Kroll), to trace and track illicit flows and assets.
The minister added that Nigeria had signed the Multilateral Competent Authority on Common Reporting Standards, which allows for exchange of financial account information.
The country, according to her, is expected to effect the first exchange by 2019 as soon as the domestic legal framework was completed.
She added, â€œNigeria has adopted the Common Reporting Standards and the Addis Tax initiative aimed at improving the fairness, transparency, efficiency and effectiveness of the tax system.
â€œFurthermore, as part of open government partnership Nigeria has included in the national action plan a commitment to establish a public register of beneficial owners.Â
“To this end, the Corporate Affairs Commission, the custodian of Nigeria’s company registry, is pursuing relevant amendments to the Companies and Allied Matters Act to comply with global standards,â€
the minister stressed.
As part of measures to tackle IFFs, Adeosun called for the tightening of Nigeriaâ€™s tax codes and tax laws that encourage tax avoidance as well as strengthening of the tax system to make it more efficient.
Advocating more responsibility on the part of destination countries of illicit financial flows, the minister advised that beneficial ownership registers should be established to allow authorities track money in financial investigations involving suspect accounts/assets held by corporate vehicles.
She further called for the elimination of safe havens that provide incentives for transfer of stolen assets and illicit financial flows abroad, and also the development of a supportive, efficient and speedy process for returning assets to originating countries.
On the Voluntary Assets and Income Declaration Scheme (VAIDS) introduced by the federal government in June 2017, she explained that the tax amnesty was targeted at increasing the taxpayer base, raising revenue and regularising the tax status of many Nigerians.
She noted that the scheme was aimed at raising at least $1 billion and bringing in four million new tax payers into the tax net.
â€œWe are using technology to improve the accuracy and efficiency of the programme. Project Light House is using advanced data mining and data analytics techniques to: identify tax defaulters, establish their tax liabilities and send notifications.
â€œThe system-wide computer software, which drives Project Lighthouse, aggregates data from multiple sources such as bank accounts, land registry records, company registration data, tax filings, customsâ€™ records, asset ownership records, among others, to identify, profile and track tax evaders,â€ she remarked.
The PCT Conference is a collaborative initiative of the OECD, the World Bank Group, International Monetary FundÂ Â (IMF) and the United Nations (UN).
The inaugural PCT Conference, which has as theme â€œTaxation and the Sustainable Development Goals (SDGs)â€, is focusing on the opportunities and challenges for taxation and its role in supporting the SDGs.
It covers practical aspects of tax policy and administration, as well as encourages an open change of experience and views on how to ensure taxation policy and practices can improve SDGs outcomes.