Can Beneficial  Ownership declarations work in Nigeria?

Can Beneficial Ownership declarations work in Nigeria?

There are some very rich business people in Nigeria. Some of these people or entities are shrouded in secrecy even though they probably own most of the property investment opportunities in Abuja, similarly in Lagos and on Victoria Island – the Manhattan of Africa. Quite often, part of the reason for this opacity is because these individuals are serving or former public officials, senior military officers, politicians, and politically exposed persons (PEPs). They go to great lengths to hide their identity and any information that connects them to sources of massive wealth. Unfortunately, some of these people have also derived personal benefit from public office or they have looted public resources when it was placed in their care.

The presence of so many anonymous companies in countries like the USA, the UK and the British Overseas Territories suggests large streams of corrupt and criminal transactions (see the Panama Papers). Their continued existence denies countries of valuable income, mainly by professionals expert in facilitating tax evasion and avoidance. Hidden company and property ownership is a critical contributor to the nearly $1 trillion US dollars that illicitly leave developing countries according to the Financial Transparency Coalition, a global network of governments, civil society and experts. Out of that, an estimated $15.7 billion of illicit financial flow is said to pass through the Nigerian financial system annually. If these figures are anything to go by, it means that Nigeria is one of the top ten countries in terms of illicit financial flows. The presence of so many anonymous companies points to too many corrupt and criminal transactions. Their continued existence deny countries of valuable income through tax evasion and avoidance. Hidden company and property ownership is a big contributor to the nearly $1 trillion US dollars that illicitly leave developing countries according to the Financial Transparency Coalition, a global network of governments, civil society and experts. Out of that, an estimated $15.7 billion of illicit financial flow is said to pass through the Nigerian financial system annually. If these figures are anything to go by, it means that Nigeria is one of the top ten countries in terms of illicit financial flows.

Names are listed and ownership is declared but the problem is that many of the names contained in the register of companies in Nigeria are not the real owners. A host of them are just fronts who have chosen to represent the actual owners, whose identities are often concealed. Others exist only in briefcases. Although it is a legal requirement to submit the names and details of directors of a company before it can be registered, it’s regarded as a mere formality. Often, no one bothers to verify whether the names or addresses listed in the registration forms even exist. This offers ample opportunity for the unscrupulous and the corrupt to go undetected. The truth is that many of those who are regularly listed as directors are not the ‘real’ owners of the companies. The identities of the real owners are left out in the documentation process even though they have controlling powers over the activities and assets of such companies. A beneficial owner is one that enjoys the possession and benefits of ownership (such as income) of a company or property, even though the ownership and title is in the name of another entity. In such a situation, the real owner is different from the registered owner. The era of opacity may soon give way if the ongoing reforms that the Nigerian government is implementing under the Open Government Partnership (OGP) are fully realized.

On April 6, 2016, a new law came into place in the United Kingdom, which requires all companies to keep a register of all those who influence and control the company. During the London Anti-Corruption summit later that year, they announced the opening of that beneficial ownership register to the world – which means that those who wish to purchase and own properties in that country will have to publicly disclose the details. As part of its OGP process, the Nigerian government followed suit and included in the country’s National Action Plan (NAP) a commitment to establish a public register of beneficial owners. The Nigeria Extractive Industry Transparency Initiative (NEITI) has already taken the lead by issuing a roadmap for implementing beneficial ownership reforms. The Extractive Industry Transparency Initiative (EITI) makes it compulsory for member countries to report beneficial owners of companies operating within the extractive sector. The roadmap for Nigeria outlined the processes, activities and timeframe for collection, verification and disclosure of beneficial owners of companies within the extractive industry.

Furthermore, the Corporate Affairs Commission (CAC), the custodian of Nigeria’s company registry, is said to be pursuing relevant amendments to the Companies and Allied Matters Act (CAMA), 1990 to comply with global standards. Part of the expected amendments will be the strengthening of sanctions against false information and non-compliance, as well as the inclusion of a section in the company registration form where information about Persons with Significant Control (PSC), will be disclosed. In line with the open contracting data standard, the Bureau for Public Procurement (BPP) will be expected to establish a publicly accessible registry of licensed owners of all companies operating in Nigeria and those who benefit from public sector contracts. It is expected that these agencies will work together with the Central Bank of Nigeria, which is already implementing the Bank Verification Number (BVN) to link ownership of properties to bank accounts. Coordination of these reforms will be key to realizing the cumulative objectives in the long term. The Nigeria Economic Summit Group, one of the leading private sector think tanks in the country, is working with Nigeria’s OGP secretariat to commit to spreading awareness and building capacity of its members to proactively disclose their beneficial ownership information in compliance with government reforms.

The implementation is expected to assist recovery of some of Nigeria’s stolen wealth. It will also make it difficult for those who benefit from ill-gotten wealth to hide it. According to the NEITI road map, the implementation of beneficial ownership transparency is bound to meet resistance from those with stakes and vested interests. Although the Petroleum Industry Governance Bill (PIGB) recently passed into law, the sector remains murky. It was recently revealed that Nigeria has lost an estimated US $9 billion since 2013 through shady practices in the oil and gas industry. Those behind this “official larceny” might be afraid of losing their ill-gotten wealth, especially in the face of public outrage that may occur after the imminent disclosures.

Nigerian President Muhammadu Buhari, in his inauguration speech, had promised his fellow citizens that he would tackle pervasive corruption and financial crimes head on. He has provided the political will and policy direction for the national reform efforts so far. However, the octogenarian leader has suffered from protracted ill health, which has seen him move in and out of hospital over the past six months. Additional impetus will be expected when and if the President recovers and returns back to work. Acting President Yemi Osinbajo has so far done well in maintaining momentum in Mr. Buhari’s absence. Although there are clear constitutional provisions that specify the way things should go in case of ‘any eventuality’, pundits are concerned about the ongoing reforms, particularly if the President’s health does not improve. There are growing demands from business elites to relax anti-corruption measures. More than ever we need Nigeria’s active civil society and an alert media to ensure the political elite of Africa’s most populous country do not become obstacles that could encumber the full implementation of governance reforms.

Uche Igwe and Martin Brown