"Nigeria's corrupt elites have profited from conflict; with oil prices at a record low, defence has provided new and lucrative opportunities for the country's corrupt kleptocrats. Former military chiefs have stolen as much as US $15 billion - a sum equivalent to half of Nigeria's foreign currency reserves - through fraudulent arms procurement deals." - new report on "Weaponizing Tranparency"
This new report, excerpted in this AfricaFocus Bulletin, was released earlier this month by Transparency International, Transparency International Defence and Security and the Civil Society Legislative Advocacy Centre in Nigeria: Entitled "Weaponising Transparency: Defence Procurement Reform as a Counterterrorism Strategy in Nigeria," it stresses that considerable progress has been made by the Buhari administration in its campaign against corruption, but that corruption is still pervasive, not least in the military. This corruption, the report argues, is one of the major impediments to an effective counterinsurgency campaign against Boko Haram.
Both topics, corruption and Boko Haram, are frequent themes of both national and international coverage of Nigeria. But this report is distinctive in closely linking the two issues, and in presenting specific proposals to strengthening anti-corruption efforts aimed at arms procurement in particular.
For a press release on the report, launched on May 18 in Abuja, visit http://tinyurl.com/mel4ozo
Notably, the report has received wide press coverage in Nigeria, but little international attention and virtually no international news coverage, although it includes the point that Nigeria's international partners share the blame for enabling such corruption.
For previous AfricaFocus Bulletins on Nigeria, visit http://www.africafocus.org/country/nigeria.php
++++++++++++++++++++++end editor's note+++++++++++++++++
Weaponising Transparency: Defence Procurement Reform as a Counterterrorism Strategy in Nigeria
In Partnership With
Transparency International (TI; http://www.transparency.org)
Transparency International Defence and Security (TI-DS; http://ti-defence.org)
Civil Society Legislative Advocacy Centre (CISLAC; http://cislacnigeria.net/)
[full report, with other related coverage, available at http://allafrica.com/view/group/main/main/id/00051928.html; Direct link to full report: http://tinyurl.com/lozqbah]
Defence sector corruption is a major threat to Nigeria's internal security and political stability. Largely unaddressed, it has weakened Nigerian counterterrorism capacity whilst strengthening Boko Haram.
Nigeria's corrupt elites have profited from conflict; with oil prices at a record low, defence has provided new and lucrative opportunities for the country's corrupt kleptocrats. Former military chiefs have stolen as much as US $15 billion - a sum equivalent to half of Nigeria's foreign currency reserves - through fraudulent arms procurement deals. Defence sector corruption in Nigeria has enabled the political elite to accumulate and distribute political patronage. Longstanding military exceptionalism meanwhile, has justified weak and compromised oversight of securityrelated spending and excessive secrecy.
By far the most significant corruption opportunities are those exploited through inflating procurement contract values and creating "phantom" defence contracts. Such contracts are used as a vehicle for money laundering: facilitated via weak or corrupted Nigerian banks, illicit financial flows are often hidden in property in the UK, United States, South Africa and Dubai.
President Buhari's government has taken significant steps to identify and prosecute individuals involved in security sector corruption. And the campaign to focus international attention on returning stolen assets has been powerful. But however effective these efforts are, they will not be enough to win the long fight against corruption. The reality is that Nigeria's attempt to secure the repatriation of large quantities of illicitly laundered assets from places like the UK makes a better media headline than it does anti-corruption strategy.
With the President's first term ending in 2019, the window of opportunity for far reaching change is closing rapidly. Only a holistic reform agenda can deliver the deep, systemic changes and improvements in transparency and accountability needed to prevent the next US $15 billion quietly leaving Nigeria through the back door.
Ex-Air Force Chief of Staff Adesola Amosu was arrested by the Economic and Financial Crimes Commission in 2016,
and his trial is still ongoing. Photo credit: Premium Times
Violent extremism thrives as a result of exploitative governing structures and state predation. Terrorist groups motivated by radical political and religious ideologies have destabilized Syria, Afghanistan, Libya, Iraq, Somalia, Nigeria, and other weak or misgoverned states. These groups have been able to co-opt disaffected populations by leveraging popular antipathy toward corrupt governments, often by presenting their own radical agenda as having greater moral value and popular legitimacy than the secular governments they seek to destroy. Predation by these regimes - whether it takes the form of elite corruption, security force abuses, or ethno-religious chauvinism - serves to validate extremist narratives about the immorality of secular governance.
The Boko Haram insurgency is now entering its fifteenth year, fed by the notorious levels of public sector corruption that have eroded the Nigerian state's legitimacy. Politicians compete for private control of national coffers, rather than delivering public goods based on the growing needs of Nigeria's booming population - on track to be the third largest in the world by 2050. Yet for the vast majority, corruption remains endemic and systemic, warping the social contract between the government and citizens. Patronage - not performance - is the ticket to advancement.
Securing a prosperous future for nearly 180 million people will be tough. The continent's largest economy has, since 1970, suffered from the largest per annum illicit financial outflow on the continent as corrupt actors seek to exploit banking loopholes to launder and hide their unlawful assets. An estimated US $217.7bn was illegally transferred out of Nigeria between 1970 and 2008. The same study estimated that illegal transfers from the African continent have tripled since 2001.
Across the board, public sector corruption is undermining the state's ability to address Nigeria's many challenges: socioeconomic underdevelopment, unemployment and insecurity. Nowhere is the failure of governance more evident than in the northeast, a region that was already impoverished even before it was devastated by Boko Haram. The conflict has displaced over 2.6 million people and killed as many as 50,000 since May 2011.
Corruption has been particularly destructive in the defence and security sector. Overlooked in peacetime, defence sector corruption has devastating real world consequences when conflict flares. With lower oil prices, corrupt elites have increasingly exploited alternative illicit revenue streams. The secret nature of defence and security budgets has made them the easiest and most lucrative opportunity to exploit. While Boko Haram has constructed a conflict economy geared around pillage, racketeering, and kidnapping; senior players in the Nigerian security sector have also profited from the insurgency.
Extra-budgetary spending on counterterrorism has dramatically increased throughout 2014 and into 2015, and with it the scale and scope of corrupt opportunities in the defence sector. Corruption has hollowed out the Nigerian Army, the largest in West Africa, and compromised the integrity of the country's Navy, which has been implicated in the theft of millions of barrels of crude oil in recent years. The result has been a corrupt war economy that incentivises high- ranking officials and security personnel to perpetuate conflict for personal gain. War has been a boon to Nigeria's corrupt.
Since coming to power in May 2015, President Buhari has taken some bold action in tackling defence sector corruption. Central to his approach have been two ad hoc, temporary audit committees: one investigating spending by the Office of the National Security Adviser and one investigating defence arms and equipment procurement. Taking on the defence establishment was a significant move: the evidence uncovered by these probes revealed that several of the country's former military chiefs, using dozens of companies, together stole as much as US $15 billion.
President Buhari's anti-corruption drive is a rare example of senior Nigerian defence and security officials being exposed to criminal investigation. By signalling that military impunity is not without limit, it is undoubtedly a positive step forward.
The approach has been coupled with a determined attempt to see the return of Nigeria's stolen wealth. During the London Anti-corruption Summit in May 2016, President Buhari demanded the return of illicitly laundered assets from the UK. The point was powerfully made, but sadly, the chances of success are slim. Asset recovery is a lengthy and resource heavy procedure. The UK performs relatively well compared to international peers, but even at the highest estimate, asset freezing and repatriation are tiny in relation to the vast scale of theft.
Over the past 12 years, UK enforcement agencies have prosecuted just a handful of cases - three state governors - and repatriated only a few million pounds to Nigeria. This is a fraction of what has surely been stolen. The extent of misappropriation of public funds by former General Sani Abacha is notorious. Listed as one of the top four most corrupt world leaders, during five years in office Abacha is estimated to have embezzled between US $2 and 5 billion. Despite unprecedented cooperation between UK, USA, Swiss and Nigerian authorities to return these stolen assets, the case is on-going 19 years after Abacha's death.
Abacha and these three governors all plundered defence and security budgets. Nigeria suffers from the continent's highest illicit financial flows because it offers the most opportunities for corruption. To stop today's assets being misappropriated, defence sector reform must be an equal priority to enforcement and repatriation, or Nigeria's leaders will always be chasing the past. Since independence, every civilian and military administration has come to power promising to root out corruption. Without progressing its approach to anti-corruption reform, Nigeria's current and future governments will at best be destined to the same media headlines as its predecessors.
1. The context for defence sector corruption
"Corruption in Nigeria is not mindless...it is calculated and systematic." former Central Bank Governor Lamido Sanusi
With evidence uncovered by the two ad hoc audit committees established by President Buhari, the Economic and Financial Crimes Commission (EFCC), Nigeria's main anticorruption agency, has indicted over 300 individuals and companies for defence sector procurement theft and misappropriation.
Fifty-five people, including former government ministers, military chiefs, state governors, and bankers were reported by the committees to have stolen 1.34 trillion naira ($6.8 billion) over a seven-year period in the shape of arms equipment deals. A further $2 billion was allegedly stolen from the National Security Budget under the watch of National Security Advisor, Colonel Sambo Dasuki. What these investigations illustrate is a system of kickbacks, where billions of dollars were diverted from procurement spending, through the use of 'briefcase' companies, in order to fund the ruling party's supporters and ensure electoral success for the People's Democratic Party (PDP) in the 2015 general elections. 11
The amounts stolen are shockingly bold. Yet the misappropriation of budgets to buy political support is not new. Successive Nigerian leaders, both civilian and military, have built governmental power structures around the country's main income stream: oil. And until recently oil revenues have typically accounted for up to 70 per cent of government revenues - feeding powerful patronage networks. Obasanjo did not even appoint an oil minister, preferring to supervise the ministry directly himself. Successive administrations have maintained the same structure: former PDP president Goodluck Jonathan, a civilian, appointed his close ally Diezani AlisonMadueke as Oil Minister. Madueke - who has recently been charged with money laundering - was described by one Nigerian Extractive Industries Transparency Initiative (NEITI) official as, "the oil institution."
The drop in Nigeria's state oil revenues has hit oil sector rents hard, and this has led Nigeria's corrupt elites to raid defence and security sector budgets to maintain their power bases. With defence budgets forming close to 20 per cent of total government spending in 2017, the sector offers lucrative rewards to Nigeria's corrupt elite. Much of this has been hidden through large value contracts. According to the former Head of the Bureau for Public Procurement (BPP) - the agency established to monitor, oversee and set standards for government procurement spending - 90 per cent of bribes in Nigeria occur through procurement. Both the size and opacity of the defence sector has made it an attractive veil for fake corporate activity.
While some of this money is stolen for individual profit, a great deal is dispersed through complex patronage networks. As former Central Bank Governor Lamido Sanusi phrased it, "corruption in Nigeria is not mindless...it is calculated and systematic." Sustaining political patronage is a system, a system that was previously predominantly funded by the oil sector but is now increasingly relying on plundering of the defence and security budget. Former President Goodluck Jonathan expended unprecedented amounts of patronage, even beyond historical norms, to improve his electoral chances. One former adviser observed that President Jonathan and his allies acted "with a siege mentality" within an unstable PDP. The oil and defence sectors were exploited to record levels in order to sure up an extensive patronage network and safeguard President Jonathan's political future. These kleptocractic networks have yet to be disabled.
Kleptocratic capture of the defence sector
What is overwhelmingly clear from the results of the ad hoc audit committee investigations is the extent of unmonitored, systemic control over the defence sector by senior government elites. The lack of clear separation between the executive and the military is a long running problem. Despite the formal end of military rule in 1999, the military has played a significant role in political life. With control of the armed forces and a monopoly on access to arms, military generals have the power to protect access to resource rents and ensure their place within the ruling elite.
Kleptocratic capture of the defence sector rests on three pillars: capture of defence budgets and income, capture of defence spending and procurement, and capture of senior military posts. Facilitating this capture are powerful senior figures - godfathers - who select and appoint personnel to defence sector positions, in order to operationalise systemic control over security finances. The system facilitates control from the highest levels of the political party to the lowest levels of the military.
Appointments can also be used as political bargaining chips: former President Jonathan cemented a pre-election political alliance with former head of state Ibrahim Babangida by appointing Aliyu Mohammed - a long-time Babangida loyalist, ex-Army chief, and NSA to two presidents - as minister. As one Nigerian Army officer put it, the "selection of officials [both civilian and military] is done politically and based on who is who. Even when personnel are picked to oversee certain aspects that involve anything in procurement, it is done based on the gain expected or to be reaped by the 'godfather' who does the selection."
Among the rank-and-file, chronic pay shortfalls, inadequate training, and dilapidated facilities create powerful incentives for corruption by undercutting the overall professionalism and morale of the military. As the military's esprit de corps has eroded, so too has its sense of purpose and focus on its core missions. Over time individual officers and soldiers have come to prioritise their own personal wellbeing - or even their mere subsistence - over the needs of the service. Perceiving themselves to be victims of corrupt behaviour, such as the skimming of allowances or embezzlement of essential operational funds, many have lost faith in the legitimacy of the system and the patrimonial guarantees made to them when they joined it.
In any country, a proportion of spending must remain confidential for security reasons; typically 15 per cent, including among states in conflict. Yet Nigeria classifies nearly all defence contracts and budgets, and considers any broadlydefined security-related matter 'secret' by definition.
Even according to the Nigerian government, the Ministry of Defence (MOD) ranks among the agencies least compliant with the 2011 Freedom of Information (FOI) Act. Civil society, meanwhile, ranks the Office of the National Security Adviser (ONSA) among those security agencies most resistant to disclosing information in response to FOI requests. These opaque habits are cultural remnants of the decades Nigeria spent under military rule that have been preserved by contemporary military and civilian leaders keen to forestall outside scrutiny of their activities. As a result, Nigeria ranks among those countries at the highest risk of corruption due to the overclassification of budget data and weak oversight of secret budgets.
This culture of secrecy is often openly hostile or vengeful towards journalists and civil society. In December 2015, soldiers reportedly perpetrated gross human rights violations during two separate military crackdowns in Zaria and Onitsha. In response to these allegations the Nigerian Army has labelled its critics as "unscrupulous and unpatriotic". Meanwhile President Buhari's government has failed to take any action to hold the military to account for incidents such as the deaths of several thousand detainees - due to starvation, torture, and disease - at the Giwa Barracks military prison between 2011 and 2014.
Similarly, in June 2016 Nigeria's Minister of Defence condemned media reports about the Chief of Army Staff's links to high-end property in Dubai describing them as "disgruntled and unpatriotic elements" and warning the media that they should show more "professionalism [when reporting on] security and defence related matters". In September 2016, military soldiers and officers of the State Security Services allegedly stripped and beat ten journalists and media workers with barbed wire before arresting them.
The Nigerian military's hostile response to scrutiny reinforces the perception that it is distinct from other state institutions and can play by a different set of rules. Moreover, there has been a long standing culture among senior officers that rank has its privileges and that promotion to top echelons comes with the prerogative to use one's position for personal gain. This heavily undermines public trust.
Despite Nigeria's 1999 return to democratic rule, the oversight exercised by civilian officials and other watchdogs over the military and security agencies remains very weak. Weak accountability has enabled powerholders along the entire defence spending chain to misappropriate state funds, from the Presidency down to unit commanders at ground level.
Although the Senate and the House of Representatives have several security committees (National Security and Intelligence, Defence, Army, Navy, Air Force, and Police Affairs), members of these panels rarely undertake in-depth oversight activities. With defence sector spending shrouded in secrecy, entities such as civil society groups, media organisations, the Bureau of Public Procurement (BPP), the Auditor General of the Federation, and National Assembly committees are similarly unable to marshal sufficient information to play watchdog, even if they have the formal legal authority to do so.
By establishing two ad hoc investigatory committees to audit the ONSA and past defence procurement, President Buhari has attempted to sidestep existing undeveloped or ineffective oversight institutions. Official announcements from the Presidency declared the probe would investigate contracts entered into from 2007 to 2015, but critics claim that current ruling party members implicated in fraud have been allowed to pay to evade charges, while opposition supporters have been held without bail and charged. Whether or not accusations over political manipulations are true, the reality is that these ad hoc bodies lack the legitimacy and credibility to be a successful long-term solution.
The acquiescence of international partners
International military partners have a part to play and have done precious little to disincentivise Nigerian security-sector corruption. By failing to integrate effective anti-corruption measures into their security engagement policies, partners are inadvertently diminishing the impact of their military assistance. US military and police aid to Nigeria, totalled US $45.4 million from 2010 to 2014, but was just a small fraction of the more than US $2 billion in security funds that was allegedly stolen by Nigeria's previous National Security Advisor - who for three decades enjoyed a close relationship with Washington.
Key international suppliers of Nigerian military hardware are facilitating fraud by agreeing to uncompetitive or unorthodox contracts. In 2013, Nigeria officials reportedly skimmed US $20 million from an internet surveillance contract directly awarded to an Israeli company in defiance of public procurement competition rules. Likewise, a former air-force chief admitted embezzling millions via seven arms contracts directly awarded to a Ukrainian company.
International partners are missing opportunities to encourage reform. The United States' efforts to sell 12 A-29 Super Tucano light attack aircraft to the Nigerian Air Force - whose last three chiefs, along with other senior officers, are currently on trial for embezzlement and procurement fraud - looks like business as usual. Contracts such as this are opportunities to prompt change, yet it is not at all clear that the Nigerian Air Force has become more transparent about its finances and procurement; and the senior air force officer invited to Washington in July 2015 to discuss the Super Tucano sale, has since been charged with corruption.
The widespread use of both international and Nigerian agents to facilitate such deals also increases opportunities for inflating contracts and paying bribes, as illustrated by the recent investigation into Rolls-Royce. Although this case is a good example of how strong, coordinated international enforcement efforts can make businesses accountable for unethical conduct.
Disrupting financial crime
The most effective action against asset flight is to prevent it occurring in the first place; and here the Nigerian and international financial sectors could play a much greater role. Recent evidence from the Presidentially-appointed ad hoc Audit Committees has shown that stolen funds often pass through multiple accounts before being moved offshore beyond the reach of domestic authorities. As facilitators of corrupt funds, both Nigerian and international banks need to raise their standards of governance and control. Those that repeatedly fail should be sanctioned or shut down. But this is not currently happening: Skye Bank has been consistently implicated in the EFCC's corruption and fraud prosecutions, such as the current N22.8 billion trial of three former air force chiefs and an Air Force Director of Finance for money laundering. Skye Bank has been indicted alongside the defendants, yet the Central Bank of Nigeria has not used its sanctioning powers to hold board members to account. Instead, the Central Bank allowed board members to announce they had "voluntarily resigned" - despite evidence of gross insider malpractice, including by the Chairman Tunde Ayeni. Ayeni is a close associate of President Jonathan and convicted PDP governor Diepreye Alamieyeseigha. Whilst chair of Skye Bank, Ayeni was also chair of Joint Aviation Services Limited - a briefcase company involved in bidding for inflated defence procurement contracts - highlighting the high level of elite control of defence spending and money laundering.