Nigeria: Potential Revenue Losses Associated with Trade Misinvoicing

Oct 31, 2018 | Global Financial Integrity | Global Financial Integrity

Trade misinvoicing is a reality impacting Nigeria and every other country of the world. Imports coming into a country can be over-invoiced in order to shift money abroad. Or imports can be under-invoiced in order to evade or avoid customs duties or VAT taxes. Similarly, exports going out of a country can be under-invoiced in order to shift money abroad. And exports are occasionally over-invoiced, for example in order to reclaim VAT taxes. Global Financial Integrity finds that trade misinvoicing is the most frequently utilized mechanism facilitating measurable illicit financial flows. Misstating import and export values has become normalized in much of commercial trade, and the same facilitating shadow financial system is used to move money of criminal and corrupt origin. The social costs of misinvoicing can undermine sustainable growth in living standards in developing countries as well as exacerbate already pronounced inequities in the distribution of income and wealth. Moreover, by depressing government revenues and exacerbating inequality, those social costs can also impede progress in the developing world on important social goals, such as poverty reduction. In this analysis we seek to provide an approximate measure of revenues lost to the Nigerian government due to trade misinvoicing.