Continued caution advised despite Nigerian corruption purge

March 10, 2016 Sanday Chongo Kabange

In September 2015, the Nigerian Communications Commission confirmed in its third-quarter compliance monitoring and enforcement activities report that South African mobile telecommunications company MTN had been hit with a series of multi-million Nigerian Naira fines between July and September. The imposition of the penalties by Nigeria’s telecommunications regulator was for various regulatory infringements, such as the sale of pre-registered SIM cards and failure to deactivate 420 incomplete and improperly registered ‘MSISDN’ phone numbers that were linked to SIM cards.

Earlier in the year, in March, Africa’s most-populous nation had ushered former military ruler Muhammadu Buhari into office as its president. Buhari, who had previously ruled Nigeria as Head of State from 1984 to 1985 before being deposed in a military coup, is considered by many observers as an incorruptible disciplinarian. After his inauguration in May 2015, President Buhari pledged to restore Nigeria’s image, which had been tarnished by the ever-increasing problem of corruption as well as the seemingly unstoppable insurgency of Islamic militant group Boko Haram.

Corruption across Nigeria is endemic and exists in schools and the education system, in government administration, and in the country’s military and police forces. It is widely reported that pervasive corruption affects all levels of government, including the police and military, and remains one of the biggest challenges facing Nigeria. President Buhari himself has estimated that government officials have stolen approximately US$150 million in public funds over the last ten years.

Legal reforms

Buhari’s ascendency to the presidency has brought some proof to the international community that Nigeria is working towards cleansing its corruption-tarnished image. President Buhari has embarked on a crusade aimed at reforming the country’s legal system and strengthening the operations of the Economic and Financial Crimes Commission (EFCC), the country’s anti-graft body. He has also initiated investigations and started arresting some key figures that served in the previous administration, which was headed by former president Goodluck Jonathan. Jonathan also risks being arrested and prosecuted for allegedly heading one of the most corrupt regimes in Nigeria’s recent history; however, no direct links have been established between the former leader and those being investigated for their roles in corrupt practices while they served in his government. Those already caught up in the ongoing dragnet have contended that the investigations and arrests are politically motivated and only targeted at select individuals that served in Jonathan’s government.

In July 2015, President Buhari formed a committee to advise him on how best to combat corruption and reform the country’s legal system. He appointed seven people to the Presidential Advisory Committee on Anti-Corruption, with most members having an academic background. Creation of the committee follows President Buhari’s electoral promise to take on graft.

On 9 November 2015, President Buhari sacked the embattled head of the EFCC, Ibrahim Lamorde, and replaced him with Ibrahim Mustafa Magu, an ex-chief superintendent of police who had served as head of the EFCC’s Economic Governance Unit (EGU). Magu is seen by peers as incorruptible and courageous for heading the sensitive EGU, a unit in charge of investigations of senior public officials. Magu has vowed to charge any entity or individual found to be involved in corrupt practices in Nigeria. In January, Magu told local reporters that the EFCC is investigating and arresting – and has even started prosecuting – the country’s ‘powerful forces’, including a former National Security Adviser, former ministers, former governors, serving and retired military men, a media mogul and several others who have been called to answer questions concerning the mismanagement of Nigeria’s resources, according to Pulse.

Goldman Sachs cited Nigeria as one of the ‘Next 11’ countries that could have an impact on the global economy if its vast resources are well managed; however, economists say that Nigeria suffers from its abundance of natural reserves. The huge flow of oil wealth means the government does not rely on taxpayers for its income and, because the politicians do not have to answer to the people, a culture of corruption is fostered.

Enforcement and transparency

In July 2015, former Nigerian oil minister Diezani Alison-Madueke was arrested in London by the International Corruption Unit of the United Kingdom’s National Crime Agency (NCA) for alleged corruption and bribery. Alison-Madueke held office under former president Jonathan until Nigeria’s elections in March 2015. The NCA also took possession of one of Alison-Madueke’s lavish properties in Nigeria’s capital city of Abuja, suggesting a degree of coordination between the financial crimes units of the United Kingdom and Nigeria. Alison-Madueke previously denied any wrongdoing relating to accusations about missing public funds.

Meanwhile, in November, former national security adviser Sambo Dasuki was arrested for allegedly stealing US$2 billion during the process of procuring weapons for the fight against Boko Haram. Dasuki is accused of issuing phantom contracts to purchase aircraft and ammunitions. His arrest follows his indictment by a panel that was tasked with probing the purchase of arms during Jonathan’s administration, and marked the first charges against a senior official under President Buhari.

In July 2015, then head of the EFCC Ibrahim Lamorde was accused of diverting US$5 billion of proceeds of corruption recovered by the EFCC, prompting a Senate committee to commence an investigation. Lamorde described the accusations as a ‘smear campaign’, and said that the total money the EFCC had recovered would not even come to US$5 billion. As of November 2015, Lamorde had sought an injunction from the Federal High Court in Abuja, seeking an order to restrain security agents from arresting him, as well as protection from being summoned by the Senate on the grounds that he had vacated office and handed over all EFCC responsibilities to Magu.

While no high-profile figures have successfully been convicted since President Buhari took office, the current arrests, ongoing investigations and the US$5.2 billion fine given to MTN are early steps towards a transparent and compliant Nigeria.

The voluntary confession by Dutch multinational commodity trader Trafigura that it paid US$4.3 billion to national oil companies in Colombia, Ghana, Nigeria, Norway, Peru and Trinidad in 2013 is another sign that Nigeria is working towards embracing a culture of transparency in doing business. Among the payments reported by Trafigura was US$2.5 billion worth of product swap deals with Nigeria’s national oil company, whereby petroleum products such as gasoline were traded for crude oil.

Trafigura made the disclosure in its first ‘responsibility’ report since joining the Extractive Industries Transparency Initiative (EITI). The EITI is a voluntary programme that extends to 50 countries and 90 resources companies, and Trafigura is the first trading house to join. EITI members are required to disclose their payments to oil companies for petroleum, gas and crude oil. Transactions with non-member countries are not required to be divulged, according to the Financial Times.

In its responsibility report, Trafigura noted that the above was just the ‘first round of disclosures’ in an ‘important and evolving process’.

Criticism

Despite taking steps to arrest escalating levels of corruption and limited or no regulatory compliance in Nigeria, President Buhari and his administration have been criticised for spending time going after looters (mainly those who served in Jonathan’s government) instead of putting in place a legal and regulatory framework to make the country a good place to do business. Nigerian newspaper Vanguard reported that senior clergy Matthew Ashimolowo from Kingsway International Christian Centre called on President Buhari to adopt the Pareto Principle in governance. Ashimolowo stated that, going by the Pareto Principle, the federal government should dedicate just 20 percent of its resources to going after perceived looters, while 80 percent should be given to creating an enabling environment for Nigerians.

President Buhari’s administration has also been launching a political vendetta against anyone perceived to be enemies of the current government – a claim political commentators believe will not help Nigeria sanitise its already corruption-dented image and weak governance systems to ensure that public entities and officials adhere to the principals of compliance.

Maintain background checks

Regardless of the apparent crackdown on corruption in Nigeria, companies or individuals intending to do business in the country are advised to continue with deep due diligence into areas of concern.

Nigeria is among Africa’s top investment destinations, with numerous companies expressing interest in injecting part of their investments into oil and gas, energy, manufacturing, logistics, agriculture and financial markets every year. It is for this reason that professional advice is sought and extensive due diligence should be conducted at all levels.

Since corruption is so widespread with few serious deterrents, international companies are likely to face requests for bribes. While prosecution in Nigeria looks less likely, the global grasp of the Foreign Corrupt Practices Act and other anti-corruption measures poses a severe hazard to any businesses that may consider paying bribes.

A number of countries across Africa are high-risk corruption zones and, despite talk and attempts to curb graft, companies need to conduct a deeper level of due diligence than they do elsewhere. A general lack of online recordkeeping and plenty of examples of the media being under state control mean that companies cannot rely on normal diligence processes. Instead, they need to have a person on the ground or instruct a third party compliance firm to conduct background checks for them.

 

 

Previous Article
Fiat Chrysler troubles highlight need for more holistic approach to compliance
Fiat Chrysler troubles highlight need for more holistic approach to compliance

Fiat Chrysler Automobiles (FCA) opened 2016 on a sour note, having to vigorously deny accusations of fraud ...

Next Article
Shadow of Volkswagen scandal hangs over Germany
Shadow of Volkswagen scandal hangs over Germany

While Germany has been praised for its moral leadership during Europe’s refugee crisis, a big question mark...

Looking for the perfect due diligence programme for your business?

Contact us