Financial Transparency Coalition

Earlier this month, Nigeria leapt past South Africa to emerge as Africa’s largest economy. The financial world has watched the shift intently, with a keen interest on the amount of money coming into Nigeria. But keeping an eye on the huge sums of money flowing out is just as important.

The economic growth didn’t happen overnight. Rather, Nigerian officials decided it was time to recalculate the Gross Domestic Product (GDP), based on new statistics they claim more accurately reflect the country’s present economic situation.

In the wake of this revision, Nigeria’s GDP skyrocketed:

As a result of the statistical revision, Nigerian GDP for 2013 was $509bn, 89 per cent larger than previously stated for last year. The change was made by bringing forward the base year for calculations to 2010 from 1990, when the structure of the economy was very different and services such as banking and telecoms had barely taken off.

Many are speculating that this reassessment will fuel a new round of foreign investment, as the oil-rich nation now vaults to the 26th largest economy in the world.

The Financial Times notes that, while many have already invested heavily into Nigeria, this could be a spark for renewed interest:

Companies ranging from Nestlé and Standard Bank to Heineken and MTB have already poured millions of dollars into Nigeria but foreign businessmen and analysts said the revision could serve as a catalyst for further investment.

As new investment opportunities arise in Nigeria, and Africa as a whole, more attention is given to the vast amounts of money flowing into the continent. But we must not forget to keep track of the money flowing out, which often leaves at an equal, or quicker, pace.

In February, Thabo Mbeki, former President of South Africa and Chair of the UN’s High Level Panel on Illicit Financial Flows, estimated that $50 billion leaves Africa through illicit financial flows every year. And, according to statistics from Global Financial Integrity, a member of the Financial Transparency Coalition, Nigeria, alone, lost an estimated $140 billion, between 2002 and 2011.

The money leaving is derived from a wide range of factors, from corporate tax evasion and accounting gimmicks to human trafficking and government embezzlement. The premature, and unchecked, departure of this capital from African countries greatly inhibits the ability to create sustainable and domestic opportunities for financing development.

But as Nigeria unveils new methods for calculating economic output, it is also looking towards new options for controlling the mass exodus of capital.

At last week’s Spring Meeting of the World Bank and International Monetary Fund (IMF), the Nigerian Finance Minister, Ngozi Okonjo-Iweala, along with several other African finance ministers, called on international bodies to help in stemming the problem of illicit financial flows.

Briefing the press, Okonjo-Iweala said African finance ministers had jointly made an appeal to the multilateral institutions to look at the problem of financial outflows from the continent, which had been estimated at $50 billion on annual basis.

Targeting the developing world is crucial. Much of the capital leaving Africa, ultimately, ends up in bank accounts across the developed world, from the U.S. to the U.K. and Europe.

African economies have grown leaps and bounds over the last ten years, but it has to be wondered: what would that growth have looked like if the money that left illicitly had instead been reinvested at home?