A new study released yesterday in Washington DC, United States of America (USA) by the Global Financial Integrity (GFI) indicates that Africa lost over $1.8 trillion in illicit financial outflows from 1970 through 2008.

The study placed Nigeria at the op of the ladder in illicit outflows among Sub-Saharan African countries.

Titled "Illicit Financial Flows from Africa: Hidden Resource for Development", the new study however focused more on illicit financial outflows from just one source: trade mispricing. It however did not take a look into outflows from mispricing of services and smuggling.

According to the study, the "massive flow of illicit money out of Africa is facilitated by a global shadow financial system comprising tax havens, secrecy jurisdictions, disguised corporations, anonymous trust accounts, fake foundations, trade mispricing, and money laundering techniques."

It stated that "the impact of this structure and the funds it shifts out of Africa is staggering. It drains hard currency reserves, heightens inflation, reduces tax collection, cancels investment, and undermines free trade. It has its greatest impact on those at the bottom of income scales in their countries, removing resources that could otherwise be used for poverty alleviation and economic growth."

The new report which is expected to be tabled at the third Annual Conference of African finance ministers in Malawi, notes that "the amount of money that has been drained out of Africa-hundreds of billions decade after decade-is far in excess of the official development assistance going into African countries."

On the report, GFI director Raymond Baker said "this devastating outflow of much-needed capital is essential to achieving economic development and poverty alleviation goals in these countries."

Examining data for a 38-year range from 1970 to 2008, key report findings include: that total illicit financial outflows from Africa, conservatively estimated, were approximately $854 billion; total illicit outflows from Africa may be as high as $1.8 trillion; sub-Saharan African countries experienced the bulk of illicit financial outflows with the West and Central African region posting the largest outflow numbers.

It said the top five countries with the highest outflow measured were: Nigeria ($89.5 billion) Egypt ($70.5 billion), Algeria ($25.7 billion), Morocco ($25 billion), and South Africa ($24.9 billion) adding that illicit financial outflows from Africa grew at an average rate of 11.9 percent per year.

Mr. Baker said "this report breaks new ground in the fight to end global poverty with analyses and measurements of illicit financial outflows never before undertaken, adding that "as long as these countries are losing massive amounts of money to illicit financial outflows, economic development and prosperity will remain elusive."

He however stressed need for transparency in curtailing the trend saying that "the drivers of illicit financial outflows vary from country to country but overall transparency in the global financial system would curtail all forms of outflows by making it harder for money to disappear once it exits the country."

"Addressing this problem requires concerted effort by both African nations and by western countries. The outflow from Africa and the absorption into western economies deserve equal attention. Through greater transparency in the global financial system illicit outflows can be substantially curtailed, thereby enhancing growth in developing countries and at the same time stabilising the economies of richer countries," he said.

Baker also promised to table the issue of illicit financial outflows before the G20 at its next meeting in Canada.

"When the G20 meets in Canada this June, the problem of illicit financial flows must be at the top of the agenda," he said.

A concluding remark on the study stated: "While the overwhelming bulk of this loss in capital through illicit channels over the period 1970-2008 was from Sub-Saharan African countries, there are significant disparities in the regional pattern of illicit flows. The West and Central Africa region, which includes Nigeria, is by far the dominant driver of illicit flows from the Sub-Saharan region. Nigeria’s influence is also behind illicit flows from the group of "fuel exporters". However, the lack of data related to countries in other groups actually overstates the proportion of West and Central Africa in illicit outflows. Hence, the long-term evolution of illicit flows from the different regions of Africa need to be interpreted with caution in light of these data gaps.

"Sub-Saharan Africa registered the highest growth rates in over 30 years during the period 2000-2008 underpinned by high commodity prices, improved macroeconomic policies, and structural reforms in a number of countries. The acceleration in growth was mainly driven by the oil-producing countries with capacity increases in Angola and the Republic of Congo and new production in Mauritania. However, during the last nine years of the study 2000-2008, when Sub-Saharan Africa enjoyed its strongest period of sustained economic growth, the pace of illicit flows from the region also accelerated relative to previous decades. Some of the acceleration in illicit outflows was undoubtedly driven by oil price increases and increased opportunities to misinvoice trade that typically accompany increasing trading volumes. The rates of outflow in illicit capital for West and Central Africa (20.4 per cent) as well as Fuel-exporters (21.8 per cent) over the entire period 1970-2008 reflect substantial outflows from Nigeria and Sudan."

Achilleus-Chud Uchegbu (Abuja Bureau Chief) CHAMPION PAPERS