Finance Minister Highlights Illicit Financial Flows as Major Threat to Fiscal Stability
Nigeria is losing an estimated $18 billion annually due to profit shifting, aggressive tax avoidance, and other sharp practices by some multinational corporations operating within the country, according to the Federal Government. This significant financial drain was disclosed by the Minister of Finance and Coordinating Minister for the Economy, Mr. Wale Edun, during a national conference on Illicit Financial Flows (IFFs) in Abuja.
The conference, themed “Combating Illicit Financial Flows: Strengthening Nigeria’s Domestic Resource Mobilisation,” addressed how huge sums of money are being moved out of the country, depriving Nigeria of resources essential for financing public services and infrastructure.
Dr. Zacch Adedeji, the Executive Chairman of the Federal Inland Revenue Service (FIRS), emphasized that IFFs, fueled by tax evasion, profit-shifting, and money laundering, represent one of the most critical challenges threatening Nigeria’s fiscal stability. He stated that the scale of these flows, particularly through aggressive tax avoidance by multinationals exploiting opaque global arrangements, continues to jeopardize Nigeria's financial health. These practices rob the nation of funds needed for infrastructure development, public services, and inclusive growth.
In response to this challenge, President Bola Tinubu recently assented to four tax reform bills on June 26, signaling a renewed commitment to modernizing the tax system, increasing transparency, and boosting compliance. However, Adedeji stressed that legal reform is merely a starting point and must be supported by improved enforcement and digitalization. The FIRS is pursuing a multi-pronged strategy that includes voluntary compliance, taxpayer education, and the deployment of advanced data and intelligence tools to track suspicious financial activities. The goal is to foster a culture where compliance is driven by trust rather than fear.
The Nigerian Tax Act (NTA) has been consolidated to align Nigeria’s tax framework with international best practices while addressing local economic realities. Key changes include an expanded definition of a “Nigerian company” to include those whose central or effective place of management or control is located in Nigeria, bringing foreign-incorporated companies managed from Nigeria under the country's tax net for their global income.
The NTA also enforces a minimum effective tax rate (ETR) of 15% for companies and revises rules for determining when non-resident companies (NRCs) are taxable in Nigeria. These reforms aim to reduce potential tax avoidance through artificial corporate structures and ensure that profits from Nigerian sources are appropriately taxed.
Read also: Africa May Never See New Large-Scale Refineries Built Again, Warns Aliko Dangote
