The Federal Inland Revenue Service (FIRS) is stepping up efforts to tackle Nigeria’s huge revenue losses to illicit financial flows (IFFs), announcing a high-level national conference designed to strengthen inter-agency collaboration and improve technical capacity for detecting capital flight.
According to the FIRS, Nigeria loses an estimated $88.6 billion annually to IFFs, primarily through commercial transactions disguised as legitimate trade. Across Africa, the continent bleeds roughly $587 billion yearly—a figure experts say hampers development financing and economic growth.
Speaking on Channels Television’s Business Morning, Professor Bolaji Owasanoye (SAN), Coordinating Director of FIRS’ Proceeds of Crime and Illicit Financial Flows Directorate, emphasized the urgency of building robust mechanisms to stem capital flight, particularly through aggressive tax avoidance by multinational corporations.
“FIRS cannot do it alone. If we cannot track properly, we cannot collect,” Owasanoye stressed. “This conference will foster synergy, information exchange, and enhance technical capacity to counter illicit financial flows.”
The FIRS has identified three major sources of IFFs—commercial transactions, criminal activities, and corruption—with commercial activities, especially multinational trade, being the largest contributor.
Owasanoye cited trade mispricing and transfer pricing manipulation as key methods multinationals use to shift profits to low-tax jurisdictions, denying Nigeria much-needed revenue.
He explained how companies inflate the cost of imported raw materials or services from foreign affiliates to reduce taxable profits in Nigeria. “Even though a company is registered here, decisions are often directed by the foreign parent company, which manipulates pricing to shift profits abroad,” he said.
To illustrate, he gave a scenario of a bottled water manufacturer importing overpriced bottle caps from a related company abroad to artificially inflate operating costs and avoid taxes.
The FIRS, now designated under the Proceeds of Crime Act, 2022, has created a dedicated department to monitor IFFs and align Nigeria with global anti-tax evasion initiatives such as the OECD’s Base Erosion and Profit Shifting (BEPS) framework.
The agency is also advocating for automatic exchange of information agreements to allow tax authorities compare multinational tax declarations across jurisdictions and detect anomalies in profit reporting.
Furthermore, the federal government is adopting a pro-poor tax policy, exempting small and medium enterprises (SMEs) below a certain revenue threshold to encourage growth while focusing enforcement on large corporations with the capacity to pay.
“The government does not want to tax poverty—it wants to tax wealth. The poor can’t pay taxes. The reforms aim at fairness while holding big corporations accountable,” Owasanoye noted.
Owasanoye highlighted that Nigeria’s fight against IFFs mirrors a global push for fair taxation, with both the United Nations and OECD urging multinational transparency. He also acknowledged that while Nigeria seeks foreign direct investment, it cannot afford “to welcome toxic investments that extract more than they contribute.”
The FIRS conference will bring together revenue agencies, financial regulators, law enforcement, and international partners to design actionable strategies against tax evasion, trade mispricing, and capital flight.
A landmark report by former South African President Thabo Mbeki revealed that over 60% of Africa’s IFFs originate from commercial activities in the extractive sector, making Nigeria’s initiative timely and critical.
The FIRS believes that with stronger data-sharing, skilled manpower, and inter-agency collaboration, Nigeria can significantly reduce illicit flows and boost domestic revenue, improving its fiscal base and financing for development.