01 Jun 2017
Halfway through Buhari’s term, what progress has been made in fighting corruption? How have Nigerian and international businesses benefited?
Midway into Muhammadu Buhari’s tenure as Nigeria’s President (he was elected in May 2015), his austere, corruption-busting image persists—to some degree. That image was key to his victory (also remarkable for being the first time an incumbent president lost to an opposition candidate in a general election). Now, halfway through Buhari’s term, what progress has been made in fighting corruption and other economic crimes? And how have Nigerian and international businesses benefited?
Shaking up the parastatals
State-owned corporations (sometimes referred to as “parastatals”) and government agencies have historically played a huge role in the Nigerian economy. Many have also been plagued by systemic mismanagement, inefficiency, and corruption. Soon after taking office, President Buhari dissolved the governing boards of almost all parastatals and took direct control of decision making. In February 2016, he dismissed the principals of 26 parastatals and agencies.
Particularly significant was Buhari’s intervention in the Nigerian National Petroleum Company (NNPC), the state-owned behemoth that he accused of losing USD 150 billion due to corruption. Having dismissed the CEO and board, President Buhari appointed Emmanuel Ibe Kachikwu (the former GC of ExxonMobil in Africa) as junior petroleum minister to turn NNPC around. Kachikwu sacked a large number of managers and, a year later, proposed “unbundling” NNPC into separate, more manageable businesses.
These initial changes were welcomed: Buhari appeared to be cutting through the murky corporate culture of many of Nigeria’s state-owned organisations. However, as the months passed and no coherent or sustainable reform strategies were articulated, the President’s desire to take direct control led to avoidable delays in decision-making within the parastatals. Buhari appointed replacement leaders to most of them only about a month ago, in April.
Meanwhile, NNPC continued to do business with a number of politically-connected companies that had been the subject of controversy under the previous government. A 2018 IPO of key NNPC assets was promised in January 2016, but by the end of 2016, no implementation programme had been agreed. Moreover, the Petroleum Industry Governance Bill that would create the framework for real institutional reform at NNPC was only passed by the upper house of the federal parliament in late May 2017. At time of writing, it is unclear whether the lower house will approve the bill.
Nigeria’s federal system of government gives the President significant but not unbridled powers. This explains why a suite of legislation to suppress economic crime proposed by President Buhari has so far failed to make it into law. Bills promoted by the President to the include:
- amendments to the Money Laundering Prevention and Prohibition Bill, which would fundamentally restate Nigerian money laundering law, expand the scope of businesses that bear specific AML obligations and create a Bureau for Money Laundering Control to co-ordinate AML initiatives;
- the Mutual Legal Assistance in Criminal Matters Bill, which seeks to facilitate co-operation with foreign states in investigating and prosecuting financial crime (to the surprise of most commentators, the upper legislative passed this bill on May 30th 2017, but it must still pass through the lower house and receive presidential assent to become law); and
- the Whistleblower Protection Bill, which would prohibit retaliation for whistleblowing in the private and public sectors.
The upper legislative house has also repeatedly rejected the President’s candidate for the role of head of the Economic and Financial Crimes Commission (EFCC).
Some commentators have questioned whether all of these bills are strictly necessary, suggesting that existing AML legislation is sufficient and that creating an additional AML agency might be unhelpful. However, critics of the legislature argue that the Senate’s lack of enthusiasm for new anticorruption laws might be connected to its members’ own difficulties: anti-corruption agencies are claimed to be investigating or prosecuting at least 12 of 109 Senators, including the Senate President, Bukola Saraki.
Notwithstanding the unpassed Whistleblower Protection Bill (which might possibly be passed in July 2017), the federal government has launched a whistleblowing bounty initiative. Anyone can anonymously report fraudulent or corrupt conduct to designated federal government bodies, and is entitled to a bounty of 2.5-5% of any funds recovered from wrongdoers. At present the scheme only relates to misconduct within the federal government and in state-owned enterprises; none of Nigeria’s 36 States have so far shown any inclination towards introducing a similar policy. But considering the federal government has 80,000 employees and an annual budget of USD 22 billion, this is probably a big enough workload for the moment.
The federal government claims it has recovered at least USD 175 million from within Nigeria and internationally as a result of the bounty. If accurate, this is a significant achievement. If whistleblowing is a success in the public sector, then perhaps a Dodd-Frank-style whistleblowing programme could be extended to Nigerian listed companies or the private sector generally.
Our foreign frenemies?
As KYC360 readers are aware, major bribery and fraud tends to be structured through offshore companies, and the proceeds of crime are often laundered and enjoyed in world financial hubs like London and New York. Consequently, Nigeria has traditionally relied on the co-operation of foreign governments in order to recover stolen assets. Where those foreign governments have failed to co-operate or turned a blind eye to corruption, Nigerian enforcement efforts have been undermined.
Some promising cross-border work has emerged in recent years. In particular, former petroleum minister Diezani Alison-Madueke and others were arrested in London in October 2015 following a joint Nigerian-UK investigation. Alison-Madueke faces imminent criminal trial in the UK, and Nigerian authorities have reportedly supplied large volumes of evidence to support prosecutors. Equally, the Nigerian and UK governments signed a memorandum of understanding on co-operation in the repatriation of stolen assets.
However, much remains to be done by foreign government to support domestic anti-corruption efforts. In particular, civil society groups and journalists have highlighted the role of London real estate as a destination for stolen Nigerian public funds. At the time of her arrest, Ms Alison-Medueke was reportedly considering buying an apartment overlooking Hyde Park. Former Governor James Ibori had several properties in London, and the Senate President’s ongoing travails relate to disputes about who really owns a house in Belgravia. Many wealthy Nigerians have invested legitimately in such assets over the years, but transparency of ownership is frustrated by UK law, which allows corporate entities based in low-disclosure jurisdictions to own real estate. A consultation recently concluded into this issue, and KYC360 readers should keep track of any proposals arising (assuming the post-June 2017 UK government retains any interest).
The importance of international co-operation to anti-corruption efforts within Nigeria was highlighted by Buhari in May 2016. In the course of an anti-corruption summit, then-British Prime Minister David Cameron was recorded saying Nigeria was “fantastically corrupt … but this particular President [Buhari] is not corrupt. He is trying very hard”. Media outlets gleefully seized on Cameron’s gaffe and sought a response from President Buhari, perhaps expecting a demand for an apology and an insult lobbed back in return. Instead, Buhari acknowledged Nigeria’s difficulties, pointed to progress made, and deftly turned the spotlight back on the UK’s role in facilitating corruption and money laundering from Nigeria: “What would I do with an apology? I need something tangible … What I am demanding is a return of assets [laundered in the UK]”.
Overall the impact of Buhari’s anti-corruption initiatives on Nigerian companies, and on international companies operating in Nigeria, has been mixed at best.
Anecdotally, sales of luxury goods, cars and real estate have slowed down since President Buhari was elected. Civil servants, who have always had a questionable reputation, are said to be much more circumspect, though it is hard to say that corruption has been slain. (A similar phenomenon was observed in China in the midst of its anti-corruption campaign, although sales may recently have recovered).
As the issue of corruption has gained political potency, Nigerian media has seized upon reports such as that of the spectacular discover of USD 43 million in cash in a luxury flat behind false wall panels. Cash to the value of roughly USD 9.8 million was seized in underground tanks at the home of Andrew Yakubu, the former General Managing Director of the Nigerian National Petroleum Company. In an ongoing criminal prosecution, the Economic and Financial Crimes Commission (EFCC) claims it retrieved the monies in GBP and USD cash from Mr Yakubu’s home following a whistleblower’s tip. (Mr Yakubu vehemently denies the allegations and has stated that the money comes from gifts. A court has ordered its forfeiture via the federal government.) Another raid, on the home of a former air force chief, led to the discovery of USD 1 million in cash.
If, as the EFCC alleges, these are the proceeds of crime, then perhaps the fact that such large sums are being kept in cash suggests that financial institutions’ compliance systems and public servant asset disclosure regimes are working. Among other regulatory initiatives, banks have compelled all customers to undergo a biometric identification process that ties each bank account to an identifiable individual’s unique biometric details and number. In the past it would have been easy enough to accept and recirculate funds via bank transfer, but perhaps doing so has become more risky. Similarly, all public sector income must now be paid into a single bank account, whereas previously it was common for public servants to receive payment to numerous, often black accounts.
To the future?
Buhari’s presidency is intertwined with anti-corruption in the eyes of the public—and the public grudgingly seem to think he is doing OK: Buhari has an approval rating of about 55%, even as ill health and powerful political opponents have limited the scope of his powers. But on the international Corruption Perceptions Index, Nigeria’s score has improved only slightly since he took office.
In the long term, the degree which President Buhari has become the personification of anti-corruption in Nigeria may be counter-productive. A sustained reduction in systematic corruption requires a political, corporate and popular cultural shift, alongside the development of resilient institutions. Yet some suggest that ordinary Nigerians have yet to take ownership of anti-corruption initiatives. Does this mean Buhari is running too far ahead of his countrymen? And, if so, does anti-corruption disappear if Buhari leaves office?
This risk is particularly pressing given the President’s age and persistent rumours about his health: at the age of 74, President Buhari has missed several cabinet meetings and spent extended periods receiving medical treatment in the UK. Moreover, the Chief of Army Staff recently warned military personnel to avoid political intrigues—stoking concerns that a coup d’état is being planned.
Developments under Buhari are encouraging but two key questions ultimately remain: can dramatic interventions be followed by institutional reforms? And can anti-corruption transcend being the passion of a charismatic individual to become a systematic value?
Author profiles: Kunle Ajagbe is a partner at Aidan Partners barristers, solicitors and arbitrators in Ikoyi, Lagos. Viv Jones is a Senior Associate in the Corporate Crime and Investigations Group at Eversheds Sutherland.
You may also like the accompanying podcast, where leading Nigerian Lawyer Kunle Ajagbe speaks to Amos Wittenberg about how much Buhari has really achieved, his blindspots, and prospects for the remainder of his time in office.
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