Improving the Regulatory Framework for the Management of Recovered Assets in Nigeria

This is a guest blog by Oluwasola Omoju, PhD, a Research Fellow at the National Institute for Legislative and Democratic Studies (National Assembly) Abuja, Nigeria. For any inquiries, you may contact him at shollcy@yahoo.co.uk.

Recovery of misappropriated assets is a core agenda of the administration of President Muhammadu Buhari. According to media reports, the Economic and Financial Crimes Commission (EFCC) has recovered over N500 billion worth of misappropriated assets and funds from 2015 till date. While this is a laudable achievement, the effective and efficient management of the recovered assets is crucial to obtaining optimum socio-economic returns.

Shortcomings in the current framework?

The current legal frameworks for managing recovered assets in Nigeria are disjointed and do not align with the standards for efficiency, transparency and accountability. The Nigeria Police Force (NPF), the Economic and Financial Crimes Commission (EFCC), and the Independent Corrupt Practices and other related Offences Commission (IPCC) have legal responsibilities to seize assets deemed to be proceeds of criminal and illicit activities. But there is no coordinated framework for managing recovered assets.

Giving individual agencies the leverage to dispose recovered assets undermines efficiency, transparency, and accountability. This has resulted in the poor management of recovered assets and undermined its effective utilisation. Media reports of recovered assets are common, but there are uncertainties about the precise value of the assets and the utilisation of the proceeds are questionable. For instance, the Federal Government itemised recoveries of misappropriated assets as part of its deficit financing sources in the 2017 budget. But performance in terms of actual realization was poor.

The lack of a coordinated approach to managing recovered funds has implications for the economy in general and the budget system in particular. It deprives the annual budget of critical revenue source. The use of such funds to implement projects that will enhance standard of living and improve economic outcomes are also compromised. This could undercut efforts to solicit the cooperation of international partners in the repatriation of overseas assets.

Best practices from the Philippines, Peru and Ukraine

Nigeria can learn from the experiences of other countries. The Philippines has had good and bad experiences in the management of recovered assets. Initially, recovered assets were returned to an escrow account in the Philippines National Bank, and the funds were highly supervised by internal and external stakeholders. However, the recovered assets were later transferred to an off-budget “Agrarian Reform Fund”. Audits of the Funds showed that the assets were inefficiently management after being transferred to the off-budget fund.

In Peru, the Fondo Especial de Administracion del Dinero Obtenido Ilicitamente en perjuicio del Estado (FEDADOI) (Special Fund for Management of Illegally Obtained Money against Interests of the State) was created to manage recovered funds and assets. The Fund is independent of the security agencies that recovered the assets, and was managed by a five-member board appointed from different government agencies, with set guidelines and procedures. Evidence showed that these system created a conflict of interest as the funds were largely used to supplement the budgets of the government agencies with members on the board.

Recovery and management of assets in Ukraine is within the purview of the Ukraine’s Asset Recovery and Management Agency (ARMA). The Agency is charged with the tracing, finding and management of assets derived from corruption and other crimes. The law establishing ARMA not only authorises it to seize and store assets linked to criminal activities, but also to own, use and/or dispose such assets including the right to sell, process technologically, or transfer the management of such assets. However, the ARMA keeps its accounts at the State Treasury Service of Ukraine (an agency under the Ministry of Finance) and its performance is subjected to independent external evaluation. ARMA also appoints a private asset/real estate management company to manage the assets on its behalf. The management of ARMA’s accounts by the Treasury and the harnessing of the expertise of assets managers entrenched efficiency and accountability in the management of the assets.

The next steps

This is a major area Nigerian can improve upon. While the EFCC, ICPC and the Police should be responsible for the recovery of assets, the management of such assets should be handled by the Ministry of Finance. This is because the recovered assets were earlier appropriated by the Ministry, and asset recovery and management is increasingly being integrated into public budgeting and accountability systems. Integration of recovered assets into the public budgeting system requires that all recovered funds be included as on-budget revenue. Hence, the EFCC, the ICPC and the Police, after obtaining final forfeiture order, should transfer the recovered assets to the Ministry of Finance rather than managing or disposing the assets themselves. Better still, the disposal of the assets can be done by the relevant agencies in coordination with the Ministry.

This will require amendments to the relevant sections of the Police, EFCC and ICPC Acts. In addition, there is need for regular independent external evaluation of the activities of the EFCC and ICPC with respect to recovered assets/funds. This involves adopting the World Bank’s principles of management of recovered assets, which include detailed public recording of receipt of assets, public declaration of the intended use of the assets, public and official reporting of actual expenditures, timely auditing of financial statements, and official responses to weaknesses found in the auditing.

If you also want to read about what CIFAR wrote on asset recovery in Nigeria, see here.

Picture: Jacobchikaike1, CC BY-SA 4.0 https://creativecommons.org/licenses/by-sa/4.0, via Wikimedia Commons