Nigeria Loses Up to ₦20 Trillion Annually to Revenue Leakages

The alarming rate of revenue loss in Nigeria has been a subject of concern for many. Dr. Olisa Agbakoba, a former President of the Nigerian Bar Association, says the country loses up to ₦20 trillion annually due to revenue leakages. This massive loss is attributed to weak fiscal governance, oil sector manipulations, and institutional inefficiencies. Nigeria can't afford to ignore these issues, as they're crippling the country's economy.

Dr. Agbakoba spoke during an interview on Frontline, a current affairs programme on Eagle 102.5 FM. He explained that Nigeria's persistent dependence on borrowing, despite its enormous revenue potential, reflects deep-rooted failures in public finance management and accountability. He cited Section 162 of the 1999 Constitution, which states that all revenues accruing to the federation are expected to be paid into a central Federation Account without deductions. It's clear that this constitutional provision hasn't been followed.

Agbakoba lamented that the Nigerian National Petroleum Company Limited (NNPCL) has played a major role in the nation's revenue crisis through multiple deduction practices and opaque financing arrangements that significantly reduce remittances into the Federation Account. He accused the NNPCL of ignoring the constitutional provision. The company's actions have contributed to Nigeria's revenue loss.

The former NBA president also questioned why Nigeria continues to pile up debt despite possessing substantial revenue-generating capacity. If resources were prudently managed, Nigeria wouldn't need to borrow. He likened the country's fiscal situation to that of a household borrowing money despite having enough funds sitting idle in its account. 'Nigeria shouldn't be borrowing at the level it is borrowing today if our revenues are properly managed,' he stated. It's essential to manage revenues effectively to avoid debt.

Agbakoba warned that Nigeria's debt profile has risen to disturbing levels, with debt servicing now consuming a significant portion of government earnings. 'If we earn 100 Naira, we first have to remove about 70 Naira to service debt obligations,' he said. 'That leaves very little for infrastructure, healthcare, education, salaries, and other constitutional responsibilities of government.' Nigeria can't sustain this level of debt servicing.

The senior advocate also faulted several crude oil-backed financing arrangements allegedly tied to future production commitments. He warned that such deals mortgage the country's future earnings. He cited initiatives including Project Gazelle, Project Yield, Project Leopard, and Eagle Export Funding as examples of financing arrangements where future crude production is exchanged for immediate cash injections. These deals aren't beneficial to Nigeria in the long run.

'The refineries are still not functioning effectively despite huge investments,' Agbakoba said. 'Without the Dangote Refinery, Nigeria would still be trapped in the endless cycle of fuel importation.' It's crucial to get the refineries working efficiently. Nigeria won't be able to reduce its dependence on fuel importation otherwise.

Agbakoba maintained that the country's revenue challenges extend beyond crude oil earnings. Petroleum profit tax, royalties, signature bonuses, gas penalties, company income tax, stamp duties, and solid mineral revenues are all affected by systemic leakages. According to him, Nigeria may currently be operating at nearly 60 per cent below its actual revenue potential due to structural inefficiencies and poor oversight mechanisms. The country's revenue potential is much higher than its current earnings.

The senior lawyer warned that declining revenues and poor fiscal discipline have pushed governments at all levels into unsustainable borrowing patterns. On the economic reforms introduced by the Tinubu administration, Agbakoba described the removal of fuel subsidy and exchange rate liberalisation as necessary policy decisions. However, he faulted the absence of adequate cushioning measures to mitigate their impact on citizens. The government should've introduced measures to cushion the effects of these reforms.

Agbakoba argued that proceeds from subsidy removal ought to have been channelled into a dedicated infrastructure development fund instead of being distributed to state governments without strict accountability measures. He also questioned the developmental impact of increased monthly allocations to states, noting that many sub-national governments now receive significantly higher revenues without visible improvements in infrastructure or public welfare. It's essential to ensure that funds are used effectively.

Agbakoba insisted that issues of fiscal accountability and revenue leakages should dominate political discourse ahead of the next general elections. According to him, Nigerians must begin to demand concrete policy directions from political leaders on how they intend to block leakages, improve revenue generation, and reduce the nation's dependence on borrowing. Nigerians shouldn't vote for leaders who don't have a plan to address these issues.

The country possesses enough resources to meet its constitutional obligations to citizens, but it lacks the fiscal discipline and governance structure needed to translate those resources into meaningful national development. Agbakoba stressed that without urgent reforms in revenue oversight, expenditure management, and institutional accountability, Nigeria would remain trapped in a cycle of debt, inefficiency, and underdevelopment despite its enormous economic potential. Nigeria won't be able to develop without these reforms.

The issue of revenue leakages in Nigeria is complex, and it requires a multifaceted approach to address. The government must take concrete steps to block leakages, improve revenue generation, and reduce the nation's dependence on borrowing. Nigerians must also demand accountability from their leaders and ensure that the country's resources are used for the benefit of all citizens. It's essential to hold leaders accountable for their actions. The country's future depends on it.