Written by Yinka Kolawole
Nigeria lost $77.7 billion to trade-related illicit financial flows (IFFs) over a ten-year period, from 2013 to 2022, according to a recent analysis by the US-based think tank Global Financial Integrity (GFI).
IFFs include the proceeds of crime, corruption, and tax evasion, among other unlawfully generated, transferred, or used cross-border transfers of money or value.
IFFs resulting from trade mis-invoicing constitute a significant obstacle to Africa’s inclusive growth and economic sovereignty, according to GFI’s report titled “Trade-related Illicit Financial Flows in Africa, 2013-2022.” The report also included trade-related value gaps for all Sub-Saharan African countries between 2013 and 2022.
Due to significant underreported or mispriced transactions, South Africa topped the list with an estimated total trade value discrepancy of $478.08 billion with all trading partners, according to GFI.
According to the research, “South Africa accounted for 42% of the region’s cumulative trade-related IFFs as a share of all sub-Saharan Africa, highlighting the high concentration of leakage among the region’s largest commodity exporter.”
Significant amounts have also been lost by a second layer of nations. Between 2013 and 2022, trade value differences totaling tens of billions of dollars were accrued by Nigeria (about $77.7 billion), Ghana (roughly $54.1 billion), Côte d’Ivoire (roughly $47.7 billion), and Kenya (roughly $47.5 billion).
The top 10 African nations’ cumulative trade value difference with developed economies over a ten-year period was also x-rayed in the research, with the South ranking highest.
With a projected $238.4 billion trade value discrepancy between 2013 and 2022 (far larger than Nigeria’s $29.7 billion in this category), South Africa is the biggest source of trade mis-invoicing with advanced economies. “South Africa’s top ranking in trade with developed nations highlights its extensive commerce with Europe, North America, and other advanced markets and indicates that significant under-invoicing of exports or over-invoicing of imports is occurring in those channels (for example, in the import of high-value manufactured goods or the export of precious metals).”
With $29.7 billion in advanced economy partners, Nigeria is the second-largest in absolute terms, mostly due to oil trade with the US and the EU.
Nigeria ($29.7 billion), Côte d’Ivoire ($24.6 billion), Ghana ($20.5 billion), Angola ($19.0 billion), Kenya ($14.2 billion), Madagascar ($11.1 billion), Cameroon ($9.8 billion), Gabon ($9.5 billion), and Senegal ($9.3 billion) are among the other nations in the top 10 by cumulative trade value gap with advanced economies. According to the GFI study, “this list is fairly similar to the all-partners list.”
“Every dollar siphoned out of African economies is a dollar not taxed or invested at home, directly reducing the resources available for public expenditure,” GFI said of the impact of illegal outflows on development. For example, it is estimated that IFFs cost Africa’s tax revenue over $17 billion annually.
