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Capital Loss And Corruption: The Example of Nigeria

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Testimony before the House Financial Services Committee
Testimony before the House Financial Services Committee

By Nuhu Ribadu
Visiting Fellow at St. Anthony's College, University of Oxford; Visiting Fellow at the

Center for Global Development; and former Executive Chairman, Economic and

Financial Crimes Commission (EFCC) of Nigeria

Good morning, Chairman Frank, distinguished US Representatives of the

Committee, and thank you for this very kind invitation to offer testimony as part

of this panel.
The global financial crisis has made nothing so clear as the fact that the global

economy is now highly integrated and interconnected. What effects one corner of

the globe will reach to all other corners, and the lack of proper regulation and

oversight in one place can undermine stability far away.

Corruption has the same effect on global markets, although it is not often thought

of in those terms. So just as it is the purpose of this hearing to explore lines of

responsibility in the global financial crisis, so too should it be to better understand

the global responsibility to end corrupt practices.

Understanding corruption as a transnational problem is the only way to fight it.

Corruption in one place is connected to others, enabled by systems of weak

regulation and poor oversight. When you think of “corruption,” there will always

be specific personalities and places that jump to mind, and inevitably Nigeria is

near the top of that list. But I think you will all agree with me that corruption is

not a native of any land; it just finds easier homes in some. Societies that have

been able to move ahead are those that put the statutes in place to criminalize

corruption and ensure that the enforcement mechanisms are proper and ready

for action.
Let it be clear from the onset that my intention is not to speak ill of my country or

continent, but rather to state the facts as they are.

Next year, Nigeria will be half a century old. In 1960, the year I was born, my

country attained Independence from Britain. The promise of independence was

boundless and the famous Nigerian energy was all too evident. We were sure we

would make it. Home to about 140 million of the West African region's 220

million inhabitants, Nigeria's demography alone elects it as a regional power.

Today, after one civil war, seven military regimes, and three botched attempts at

building real democracy, there is one connecting factor in the failure of all

attempts to govern Nigeria: corruption.
* * * * *
Mr. Chairman, your chosen theme for today's hearing is right on target.

Corruption and capital drain have been the major factors in the lack growth and

development in the region. The corruption endemic to our region is not just about

bribery, but about mismanagement, incompetence, abuse of office, and the

inability to establish justice and the rule of law. As resources are stolen,

confidence not just in democratic governance but in the idea of just leadership

ebbs away. As the lines of authority with the government erode, so too do

traditional authority structures. In the worst cases, eventually all that is left to

hold society together is the idea that someday it may be your day to get yours.

This does little to build credible, accountable institutions of governance or put the

right policies in place.
The African Union has reported that corruption drains the region of some $140

billion a year, which is about 25% of the continent's official GDP. In Nigeria alone,

we had a leader, General Sani Abacha, it was believed that he took for himself

between $5–6 billion and invested most of it in the western world.

With this history, the EFCC undertook the investigation and auditing of the assets

of serving state governors and public officials suspected of stealing public funds.

We were assisted by the London Metropolitan Police, including in two cases

involving governors. Mr. Joshua Dariye, Governor of Plateau state, was found by

the London Metropolitan Police to operate 25 bank accounts in London alone to

juggle money and evade the law. Like many of the governors, he used front

agents to penetrate western real estate markets where he purchased choice and

expensive properties. The London Metropolitan Police determined Dariye had

acquired £10 million in benefits through criminal conduct in London, while

domestically we were able to restrain proceeds of his crimes worth $34 million.

The other was the case of Mr. D.S.P. Alamieyeseigha, governor of oil rich Bayelsa

State. He had four properties in London valued at about £10 million, plus another

property in Cape Town valued at $1.2 million. £1 million cash was found in his

bedroom at his apartment in London. £2 million was restrained at the Royal Bank

of Scotland in London and over $240 million in Nigeria. This is in addition to bank

accounts traced to Cyprus, Denmark, USA and the Bahamas.

These are just two examples. In 80% of the grand corruption that takes place in

Africa, the money is kept somewhere else, enabled by systems of poor regulation

that allow abuse by those looking for ways to profit.

Between 1960 and 1999, Nigerian officials had stolen or wasted more than $440

billion. That is six times the Marshall Plan, the total sum needed to rebuild a

devastated Europe in the aftermath of the Second World War. When you look

across a nation and a continent riddled with poverty and weak institutions, and

you think of what this money could have done – only then can you truly

understand the crime of corruption, and the almost inhuman indifference that is

required by those who wield it for personal gain.
For the West to finally understand why those like myself and my colleagues here

today, John Githongo and Monica Macovei, are willing to risk so much, risk our

lives, to fight corruption in our home nations, the West must then be willing to

see corruption as not just a system of bribes and patronage, but the systematic

undermining of responsible governance, of visionary leadership, of a society's

ability to meet and overcome challenges. The West must understand that

corruption is part of the reason that African nations cannot fight diseases

properly, cannot feed their populations, cannot educate their children and use

their creativity and energy to open the doorway to the future they deserve. The

crime is not just theft. It is negligence. Wanton negligence, the full impact of

which is likely impossible to know.
I have said this before, and while I know it is a controversial statement, I stand by

the idea that corruption is responsible for as many deaths as the combined results

of conflicts and HIV/AIDS on the African continent.

I always see myself as a policeman first, and as a law enforcement officer at the

frontlines, I have seen corruption provide fertile ground for injustice, for violence,

for the failure of government and the failure to use revenues and donor support

for the benefit of the people. I see how those who are confronted with these

systems – diplomats, foreign businesses, NGOs and others with the best of

intentions for the continent – make the choice to work within those corrupt

practices to get the job done faster, or try to work ethically and morally while

knowing this choice will cost them time, profit, and impact. I see people suffer,

and while they may not know why or how exactly, they understand that it is

unjust, they know right from wrong, and they know that as long as these systems

are allowed to thrive, their lives will never be better. But so long as bowing to

corruption is the primary way of succeeding in certain societies, it trains

generation after generation to accept its yolk, get their due, and ignore those

around them.
On a regional dimension, it is estimated that some $20 billion leaves Africa

annually through the illicit export of money extorted from development loan

contracts. This money is deposited in overseas banks by a network of politicians,

civil servants and businessmen. This figure is now roughly equal to the entire

amount of aid from the US to Sub-Saharan Africa every year.

This outflow is not just abstract numbers: it translates to the concrete reality of

kids who cannot be put in schools, who will never learn to read, because there are

no classrooms; mothers who die in childbirth because the money for maternity

care never made it to the hospitals; tens of thousands who die because there are

no drugs or vaccines in hospitals; no roads to move produce from farms to

markets or enable a thriving economy; no jobs for young school graduates or

even ordinary workers; and no security for anyone because the money has been

stolen and shipped out.
* * * * *
The picture I paint here is that of my country. The picture of a potentially great

land, slowly poisoned by the idea that the importunity of lawlessness is success.

The picture of a land held hostage for decades by a kleptocratic bunch of

fraudsters who built a career in politics to protect their lines of revenue. I am

saddened when I hear America's new president, his First Lady, and his cabinet

officials all speaking at graduation ceremonies and calling for service to your

country and your community, because I know that in Nigeria that this is not

happening at the moment.
While there is much blame to be directed at Nigeria for this state, we should not

stand accused for these crimes alone. The unholy alliance between local political

elites and western financial institutions has been the foundation of this narrative

of shame. The best illustration yet is the now famous Halliburton/KBR scandal

where, as a Nigerian Newspaper recently reported, our leaders received “stacks

of US dollar bills in briefcases and sometimes in bullion vans” until some $185

million had been exchanged for a contract to build a liquefied natural gas plant.

The other famous case is the Siemens scandal. According to the US Securities and

Exchange Commission [SEC], Siemens made approximately $12.7 million in

“suspicious payments” for Nigerian projects, including to government customers

for four telecommunications projects. The total value of the four contracts was

approximately $130 million. There are many other instances. The total amount in

bribes is staggering.
In both of these cases, the United States and Germany, the parent nations of

these two companies, have initiated stern investigations and issued out hefty

fines on the companies – but those who received the bribes in Nigeria continue to

enjoy the fruits of their labors, which only means the cycle will continue. It is clear

that KBR did their own calculus: $185 million in bribes, plus eventually almost

$600 million in fines for violation of the Foreign Corrupt Practices Act, but they

won $6 billion in business for their efforts. These projects continue on. And this

kind of math will continue on for as long as companies realize there are those on

the ground willing and eager for this type of facilitation. In Nigeria, the alleged

culprits are going about their daily lives and even running the government by

default. And yet they are still engaged from outside as equal partners in

governance and development.
* * * * *
I have always held the belief that the laws needed to check these problems often

already exist; what is lacking is the culture of enforcement. Enforcement blossoms

only where there is the necessary political will, and this political will must be

strong at the very top. There is no place in the world where anti-corruption

efforts will succeed without this political will, without leadership to promote the

effort openly as a moral and political force. Without this will, the pressure on

enforcement agents smothers their efforts and is destined to destroy the very

agencies defined to lead the war against graft.
I learnt this myself by firsthand example. Having spent five years building Nigeria's

EFCC into a world-class crime-fighting agency with trusted partnerships with US

and UK agencies, all of it has now changed, like many of the other reform efforts

in the country.
When the EFCC was formed in 2003, our country had never secured a single

criminal conviction for corruption charges. We were fortunate to have the

political support of President Obasanjo; of other several powerful ministers in the

government including Nasir El-Rufai, from whose budget the original money to

support the EFCC came; from key Senators; and from the judiciary whose

responsibility it was to decide the cases presented to them.

By 2007 we had secured convictions in over 275 of the near 1000 cases in the

courts. It was modest but revolutionary, especially since the convictions were

from cases against high-ranking officials such as the leadership of the Nigeria

Police, a number of state governors, ministers, legislators and top bureaucrats.

The symbol of these convictions to ordinary Nigerians had more impact than I

could have believed. But for the first time, they saw those living unlawfully and

with impunity being called to task, and they allowed themselves to hope that a

new Nigeria, where the fruits of their labors would finally be enough to prosper,

may be coming.
And things changed, at least for a while. This was homage to the extraordinary

will and belief of young Nigerians who saw corruption as the barrier to the

progress of our country and wanted to contribute. The effort we made at the

EFCC was a marriage of two forces: pressure from outside and the force from

within. The international community deployed the instruments of the Financial

Action Task Force [FATF] to trigger necessary reforms, which provided us the

platform to build a strong local program to clean up our financial institutions and

prosecute those who sought to undermine them. This ultimately paved the way

for a far-reaching banking reform in the country, famously described as the

consolidation of about a hundred mushroom banks into 25 strong institutions.

Some of these banks are now seen as credible financial institutions with

continental reach; indeed, some of them are stepping in to fill the gaps left by

decreased activity of Western banks during the financial crisis.

The EFCC also helped to address the problems in the Niger Delta, which, in my

opinion, is driven entirely by corruption. Indeed, one of the governors of the Delta

that we investigated offered me $15 million in cash to stop the investigation

against him. We charged him both for the theft of state revenues and for the

bribery attempt. Sadly today he is still one of the most powerful political figures in

both the ruling party and the country. This clearly highlights the problem of the

Delta – money meant to have gone for development has gone to very few hands

and is used for negative ends. In 2003-4, almost 100,000 barrels of oil was stolen

daily; by 2005-6, we had managed to reduce this to 10,000 barrels per day. We

also secured convictions for kidnappers in the Delta, who were driving the cycle of

violence and bribery with the private oil companies.

The entire team responsible for these successes, which was trained by a variety of

agencies in the US, has been moved out of the EFCC. I personally have been

dismissed from the service, though I continue to challenge this dismissal in court.

After surviving an assassination attempt, I decided to relocate temporarily out of

Nigeria. But much work remains to be done.
But the policy today in Nigeria is to use all the right rhetoric – speaking of the

need for rule of law and the fight against corruption – to cover-up their real

campaign to completely undo the reform efforts of the previous government and

so thoroughly confuse corruption and anti-corruption that no one can sort out

which is which any longer. This is why today, many of the law enforcement

agencies that used to work hand-in-hand with the EFCC are no longer willing to

partner with the EFCC or the Nigerian Justice Department. The issue of integrity is

paramount in such relationships.
* * * * *
I offer these examples to illustrate the challenge in fighting corruption. When you

fight corruption, it fights back. It will likely have greater resources than you, and it

is lead by those who operate outside the law and view the fight as life-and-death

for their survival. In a globalized and networked world, we all need to believe that

the fight against corruption must assume a transborder dimension. Our own

modest success at the EFCC was supported by efforts of institutions of the United

Nations, regional bodies, and many bilateral bodies like the US Secret Service, the

FBI, the US Postal Service, and the Department of Justice. I would particularly

mention the support we got from the United States in setting up and nurturing

the Nigeria Financial Intelligence Unit. We were also aided by the emergence of

statutes that offered universal applicability. But without a doubt, the fight against

corruption in countries like Nigeria will require strengthening international

regulations and standards to enable enforcement on the ground.

For example, the work of the EFCC would not have been possible without the

Financial Action Task Force, which de facto forced Nigeria to develop new anti-

money laundering laws and spurred the creation of the EFCC. However, the FATF

lost its original might and importance and there is a need to strengthen it,

empower it, and provide the necessary framework for international financial

regulations. Stronger global standards against money laundering can force Nigeria

and other countries to accept that the old way of business will come with too high

a cost.
Similarly, the US could help promote a Proceeds of Crime law that has treaty

status, and push the boundaries of the Foreign Corrupt Practices Act (FCPA) to be

expanded power to bite both givers and takers of bribes. Until those receiving the

bribes are punished for their actions, the marketplace for high-stakes elite bribery

will continue to thrive. I would also propose that Congress support civil society

monitoring programmes and direct support for programmes building investigative

journalism, which can support transparency and anti-corruption efforts.

Other challenges will include expanding cooperation in intelligence gathering and

sharing and reigning in the vicarious liability of tax havens and offshore banks.

This comes back to the theme of today's hearing, about the role of financial

institutions. Safe havens are undermining the effort of poor nations to make

progress and we must all work in concert to ensure that secrecy does not

undermine greater transparency and accountability. The UK's Commission for

Africa estimates that the assets stolen from the continent and held in foreign

bank accounts amount to $93 billion. If Africa can succeed in tracing and

repatriating such stolen wealth, the next chapter in the story may truly turn a new

page, and the days of aid dependency can start to wane.

* * * * *
From a distance, systemic corruption seems like too big a hurdle to overcome.

Nigeria's problems may seem insurmountable, but the rest of the world can make

a difference by doing what they can to promote transparency. In five short years,

the EFCC was able to make a difference in one of the most challenging

environments on the planet; the lesson is that small measures with limited

support can bring about meaningful change.
But to do this, Western partners and others must truly understand how

corruption works and that in some instances they have been unwilling partners to

it, even when the intentions have been nothing but good. Corruption is often

viewed as a political challenge, and many donor nations would rather support

more humanitarian-based causes, like health and education. But it is time for

everyone to understand that by pumping money into development efforts

without a clear accountability mechanism as a part of such programs, these

efforts are often as good as putting money down the drain. The US has many new

health and development initiatives in Africa – in Nigeria alone the total is over a

half billion dollars a year. You owe it to yourselves and to your taxpayers to ask

how this money is spent, ask for results, and insist that any such funds are spent

to the good of the people. I believe if you looked more closely at some of the

organizations in Africa tasked with utilizing these funds, you would not like what

you see. The same is true of any nation offering development aid on the

continent; the need for greater oversight standards are needed by all partners.

The examples I give today are not to point fingers, but to illustrate that corruption

is killing Nigeria, and it is killing across the African continent. I urge you to view

the fight against corruption as the ultimate humanitarian effort, for surely there is

no stronger chain to shackle the poor to their lot. Corruption may have taken

some shots at us, but what it is doing to ordinary Nigerians every day is far worse

and far more fatal.
When corruption is king, there is no accountability of leadership and no trust in

authority. Society devolves to the basic units of family and self, to the baser

instincts of getting what you can when you can, because you don't believe

anything better will ever come along. And when the only horizon is tomorrow,

how can you care about the kind of nation you are building for your children and

your grandchildren? How can you call on your government to address what ails

society and build stronger institutions?
Corruption makes democracy impossible because it subverts the will of the

people. A select few, with so much money and authority, continue to steal

elections and make a mockery of the notion of government by the people or for

the people. Nigeria today is the worst example of electoral theft in the world. So

it is also important that the United States and other partners in Nigeria stand by

the Nigerian people first and foremost, and say that enough is enough.

Corruption is one of the greatest crimes the world has ever known. But those who

are suffering the most from its poison are the least able to fight it; their

resources, their health and wellbeing, and their futures have been stolen away.

There is no surer salt in the earth of democratic and representative governance. It

is for this reason that I call on you to help fight this global injustice, both for the

sake of Nigeria, and for every other country that will never know its potential

without your support. But at the end of the day it will be we, the Nigerians and

the Africans, that will have to solve our own problems and catch up to the rest of

the world in freedom and development. I assure you that can be done.

Thank you once again for this kind invitation and I now welcome your questions.

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