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Capital Loss and Corruption: The Example
of Nigeria
Testimony before the
House Financial Services Committee
May 19, 2009
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
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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
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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.
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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.
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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
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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
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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.
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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
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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.
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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 ‐
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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.
* * * * *
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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
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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
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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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