Public Register Following Beneficial Ownership Data Standard (NG0039)

Brief Description of Commitment: The establishment of a public register of beneficial owners of registered entities will enable the relevant authorities mandated to curb corruption, identify natural persons who directly or indirectly own, control or enjoy the benefits of registered entities.

General Problem / Challenge Addressed by the Commitment: Anonymous/shell companies constitute potential dangers to the economy and security of the countries where they operate. These companies deny the countries valuable revenue through tax avoidance, and mask links to corruption, money laundering, drug trafficking and terrorism financing. People use proxies and fronts to register companies, and the legal owners are usually not those who control and benefit from the companies. Politically exposed persons also use their influence to confer advantages to themselves through such companies.

Specific OGP Issue(s) in Focus: 1. Corruption 2. Opacity in the utilization and management of public resources

Rationale for the Commitment: The identification of beneficial owners of registered entities will discourage corruption, enable the government to trace and curb illicit financial flows, terrorism financing, tax evasion and financial mismanagement, and empower citizens to match the identities of those handling government contracts with a view to identifying conflicts of interest.

Main Objective: To put in place a system that enables openness, transparency and full disclosure of beneficial ownership information of registered entities.

Anticipated Impact: 1. Reduction in loss of public resources 2. Availability of resources for national developmental projects

Expected Outcomes | Milestones (Performance Indicators)

1. Increase in valuable revenue through tax avoidance and reduction in money laundering, drug trafficking and terrorism financing. Increased tax revenue accruing to Government as a result of curbing money laundering, drug trafficking and terrorism financing activities.

2. Increased Identification of natural persons who directly or indirectly own, control or enjoy the benefits of the corporate entity, masking corruption. An operational register of beneficial owners institutionalized

Planned Activities (Start Date - End Date | Expected Output(s) | Output Indicator(s))

1. Documentation and Award of Contract for the Design, Development and Deployment of the 2nd Phase of Electronic Register of Beneficial Owners of Corporate Entities in line with Open Data Standard. (January 2023 - December 2024 | Deployment of electronic register of beneficial Ownership developed and deployed under the 2nd phase | 1. Award of contract and transfer of funds by the World Bank for project execution completed 2. Percentage completion of contract by the Vendor.)

2. Testing and Validation of the Electronic Register of Beneficial Ownership of Corporate entities by stakeholders. (January 2023 - December 2024 | Pilot a robust and functional electronic Register of Beneficial Owners that meets the Beneficial Ownership Data Standard | A fit-for-purpose register of beneficial ownership in line with Beneficial Ownership Data Standard developed.)

3. Roll out and confirmation of the Electronic Register of Beneficial owners of registered entities developed according to the Beneficial Ownership Data Standard. (January 2023 - December 2024 | Functional electronic register of beneficial owners of corporate entities in line with the Beneficial Ownership Data Standard. | Electronic register of beneficial owners of corporate entities in line with the Beneficial Ownership Data Standard produced.)

4. Notice and reminder to registered entities on the obligation to submit information on Beneficial owners as required by the Companies and Allied Matters Act (CAMA) 2020. (January 2023 - December 2024 | Evidence of publication of notices for corporate entities to comply with the submission of information on beneficial owners as required by the Companies and Allied Matters Act (CAMA) 2020 | Number of companies complying with notice to submit information on their Beneficial owner)

5. Capacity building for law enforcement agencies, and CSOs on the use and benefit of the beneficial ownership register. (January 2023 - December 2024 | Increased number of law enforcement officers knowledgeable on the laws governing the application of the beneficial ownership register use | 1. Number of trained law enforcement agencies and Officers using the electronic register of beneficial ownership. 2. Number of law enforcement agencies sensitized on the use and benefits of the electronic register of Beneficial owners 3. Number of law enforcement officers trained on the use of the electronic register of beneficial owners)

6. Public engagements to create awareness of the existence, use and benefit of the electronic Register of beneficial ownership. (January 2023 - December 2024 | Increase in the number of citizens accessing and using the Beneficial ownership register | 1. Number of public engagements held to create awareness on beneficial ownership. 2. Number of citizens using the BO register platform.)

Source(s) of Funding: Federal Government Budget and Donor Agencies

Action Plan Review

Commitment 9. Establish public register of beneficial owners of corporate entities in line with Beneficial Ownership Data Standard

For a complete description of the commitment, see Commitment 9 in Nigeria’s 2023–2025 OGP Action Plan.

Context and objectives:

This commitment aims to establish a public register of BOs of corporate entities in line with the Beneficial Ownership Data Standard. This is expected to address corruption, curb illicit financial flows, and reduce the opacity of actual company owners, thereby increasing resources available for national development and public services. This commitment will focus on six activities: (1) designing the electronic register, (2) testing and validating the register, (3) rolling out the register, (4) raising awareness for registered entities on submitting the requisite information, (5) capacity building for companies on the use and benefits of the register, and (6) creating awareness through public engagements.

There has been considerable progress under Nigeria’s first two action plans. [97] The Corporate Affairs Commission (CAC), civil society, and international partners have worked towards beneficial ownership transparency over the last seven years. [98] Previously, the Nigeria Extractive Industries Transparency Initiative established a beneficial transparency portal for the oil, gas, and mining sectors. [99] CAC began uploading available beneficial ownership information to their public portal of registered companies starting in 2021. [100] Civil society is already cross-referencing these and other public databases to flag suspicious activity. [101]

CSO actors and the government of Nigeria note that corruption in Nigeria is “astronomical,’’ manifesting in the lack of or limited public services to citizens. [102] Former Minister of State for Budget and National Planning Prince Clem Ikanade Agba reported that over half a trillion dollars has been lost since 1960 through corruption heavily aided by shell companies that enable illicit financial flows. [103] According to FinCENFile, beneficial ownership transparency is a strategic solution to curb illicit financial flows, especially given its transnational nature. [104] Clarity around the true beneficiaries of companies in Nigeria can help reduce instances of corruption and state capture and facilitate accountability when they occur. This is particularly true for companies fulfilling public contracts, as corruption in public procurement is a significant drain on Nigeria’s public resources. [105]

Potential for results: Substantial

Nigeria’s beneficial ownership register is a product of years of collective action and advocacy. The CAC publicly launched the register (https://bor.cac.gov.ng) on 25 May 2023. [106] Therefore, this commitment’s potential lies in the commission and partners’ ongoing work to strengthen awareness, compliance, and sanctions. Its potential also relies on key government agencies, such as the Bureau of Public Procurement and those managing the extractives sector, to use BO data to mitigate corruption. CAC and partners are encouraged to use the remainder of the implementation period to increase the number of companies covered in the register and ensure data meets the Beneficial Ownership Data Standard. It will also be key for the government to demonstrate that noncompliant companies will face sanctions, and suspicious activity brought to light through the register will be investigated and prosecuted as appropriate. It will be vital that the portal continue to be maintained under the new administration and CAC leadership. Collaboration across government entities and banks to enforce compliance and leverage BO information to combat corruption will also be key to this reform achieving its overarching objectives.

At the time of writing this report, Nigeria had already accomplished the first three milestones under this commitment to design, test, and roll out the electronic register. The register was developed by a local developer, making it easier to manage any emerging technical issues, and the API access was handed over to CAC. [107] Open Ownership’s Regional Manager for Africa and the Middle East highlighted that there is work to do to ensure compliance for all registered entities, particularly legacy companies. [108] As of December 2023, CAC reported that the BO register contained 728,332 persons of significant control. [109] The register includes the full name of the person with significant control, the date when ownership or control started, their occupation, service address, and nationality, among others. [110] Currently, staff must update the portal on the backend with new information, which is resource intensive. [111] CAC Chief Executive Terver Ayua-Jor stated that CAC is undergoing the resource intensive process of digitising physical records. CAC’s digitalisation of over four million companies began in January 2021. [112] This is expected to take a long while due to limited workforce and equipment. [113] Increasing compliance among existing companies is an important next step for this reform.

Nigeria is one of the first countries in Africa to use the Beneficial Ownership Data Standard (BODS). The register’s aim to comply with the BODS will ensure that data meets international best standards in quality, usability, and interoperability. [114] BODS ensures the data is interoperable with datasets from other organisations and Open Ownership tools for analysis. [115] An important opportunity to address corruption and increase government revenue exists in linking the BO register with implementing agencies such as the Nigeria Upstream Petroleum Regulatory Commission, Bureau of Public Procurements, Nigeria Extractives Transparency Initiative, and Mining Cadastre Office. [116] CAC states that integration with the National Identity Management Commission to verify natural persons with their national identity number has helped to verify BO data. Law enforcement agencies can also flag discrepancies for CAC to address. [117]

While anyone may search for entities and individuals on the register, only CAC-approved entities can receive API access to bulk download BO data. CAC reports that law enforcement agencies such as the Nigeria Financial Intelligence Unit, Economic and Financial Crimes Commission, Code of Conduct Bureau, and Nigeria Police are using their API access to discharge their mandates. CAC states that CSOs and journalists can apply for API access and must state the purpose for using the information. [118] A civil society representative notes that interagency rivalry in Nigeria may result in agencies not drawing attention to their use of the BO register for decision-making and sanctions. [119]

In September 2023, two investigators cross-referenced information from Nigeria’s BO register with other public information to highlight red flags. In response to the Open Ownership challenge, the investigators identified oil company owners and bank investors that own more than 20 million GBP in UK property. They also uncovered a Nigerian aluminium company owned by Russian companies with links to a Russian individual sanctioned by the United States. [120] These findings indicate that increasing the scope of available BO data, as well as links with other databases, will increase the register’s power as a tool to address corruption.

Strengthening sanctions and compliance is a key next step in BO reform. The 2020 Companies and Allied Matters Act empowered CAC to supervise, regulate, and impose sanctions for noncompliance or false information around beneficial ownership information disclosure. [121] As of 9 January 2024, CAC reports that over 91,000 entitles were listed to be struck off the companies’ register for failure to comply with BO disclosure requirements. [122] Companies that fail to comply will be made inactive in the register. Government entities and banks have been instructed to not honour any inactive corporations and to advise such companies to submit their BO information and become active before engaging. The Central Bank has issued a directive to all banks, and CAC and the Bureau of Public Procurement have a memorandum of understanding on engaging only companies in compliance. [123] CAC underscores that coordination across government entities and banks is key to ensuring compliance with BO disclosure requirements. [124]

Securing sufficient and established funding will be essential to sustaining BO reforms. CAC is concerned that the federal government’s new policy to collect 50% of revenue at source will severely undercut CAC’s budget. CAC does not receive government funding despite being a public entity. CAC states that such a decrease presents a challenge to pay for licences for digital applications used for the register. Limited funding also inhibits CAC’s efforts to complete the digitisation of physical records, especially those in state offices. CAC would like to hold trainings across state capitals but notes this would require funding support. [125] Partners who have supported the BO register include Open Ownership, the World Bank, USAID, OGP, and CISLAC. As some partners transition and others join, there is an opportunity to keep everyone in the ecosystem informed on the progress and priorities. Moreover, long-term planning for the financial and administrative sustainability of the register will be essential to ensure that its maintenance is not dependent on donor funding. [126]

Within this commitment, CAC commits to continuing public sensitisation on the existence and use of the BO register. [127] Milestones 5 and 6 specifically target law enforcement bodies and the public to encourage the use of the register to hold government officials to account. CAC aims to continue training government institutions with a mandate to investigate and prosecute corruption, such as the Independent Corrupt Practices and Other Related Offences Commission, Economic Crimes and Financial Crimes Commission, ministries, financial institutions, and security agencies. [128] CAC also committed to continuing workshops for civil society and the public to enable citizens to use the BO register. [129] In 2023, CAC held trainings in major cities such as Lagos, Kano, Abuja, and Port Harcourt. [130]

Such workshops are important to ensure that government and public actors understand the possibilities of the BO register as an anti-corruption tool. CAC and partners like CISLAC can continue to target groups such as investigative journalists, academics, and CSOs playing a watchdog role to maximise outreach efforts. These efforts will be most effective if CAC and other government bodies can demonstrate how the government acts on red flags raised from BO information. Evidence that the government takes appropriate actions in response to suspicious information will be key to encouraging public use of the register.

CAC and partners can also use sensitisation with the private sector and professional service providers such as lawyers and other accredited agents as an opportunity to increase compliance with BO information reporting requirements. Favour Ime from Open Ownership recommends targeted outreach to professional service providers such as lawyers, company secretaries, and other relevant actors to disseminate information on sanctions for noncompliance before they come into effect. She also recommends a deliberate engagement strategy to increase compliance among legacy companies. CAC could set a goal of increasing compliance to 50% by 2025. [131] Reformers could prioritise outreach to high-risk sectors—such as companies engaged in public procurement—to further tackle corruption and illicit financial flows. Ultimately, designing outreach around the complementary aims of increasing compliance with BO disclosure requirements and increasing use of the register as an anti-corruption tool can enable CAC and partners to make best use of time and resources.

Opportunities, challenges and recommendations during implementation

The introduction of an economy-wide BO register in Nigeria is a significant achievement. Given existing progress, implementers are encouraged to go beyond milestones in the action plan and prioritise activities that advance compliance, sanctions, and use around the BO register. Moreover, for this commitment to succeed, continuing to strengthen and publicize the BO register will need to remain a priority under the new CAC leadership within the new administration. [132] Opportunities to strengthen companies’ compliance with BO information reporting requirements include:

· Strengthening collaboration across government entities and banks to enforce BO disclosure compliance. CAC could establish memorandum of understandings with key government entities, as done with the Bureau of Public Procurement, such as Financial Intelligence Unit, the Department of Immigration, and the Central Bank of Nigeria. [133] Government agencies such as the Bureau of Public Procurement that frequently interact with companies can establish policies that require all companies intending to contract for the government to provide evidence of compliance with BO from the CAC. Similarly, banks can make compliance with BO a prerequisite for opening a corporate account.