Reported by: Ijeoma G | Edited by: Oravbiere Osayomore Promise.
Nigeria’s Minister of Finance and Coordinating Minister of the Economy, Wale Edun, has delivered an urgent call for a strategic shift in how Nigeria and other African countries finance development, warning that prolonged dependence on foreign borrowing and large annual outflows of illicit funds threaten economic stability and long-term growth. Edun spoke at the 5th Session of the African Union Sub-Committee on Tax and Illicit Financial Flows in Abuja, emphasising that both domestic resource mobilisation and the fight against illicit financial flows are central to Africa’s economic future and debt sustainability.
Edun outlined the challenge with stark clarity, noting that illicit financial flows drain resources equivalent to roughly $88 billion from African economies each year — money that could otherwise be deployed to improve infrastructure, healthcare, education, and other social services. He said that this outflow of capital, driven by tax evasion, trade mispricing, opaque corporate practices, and illegal transfers, weakens domestic resource bases and undermines fiscal capacity across the continent. Such losses also exacerbate the need for external debt, creating a cycle where countries incur more borrowing to fill financing gaps created in part by these illicit outflows.
Edun stressed that development cannot be sustainably financed by debt or aid alone. He observed that in many cases, African countries pay more in debt servicing costs than they receive in overseas development assistance and foreign direct investment combined. According to Edun, this imbalance underscores the urgent need to reduce reliance on external borrowing and instead strengthen domestic revenue systems, private sector participation, financial inclusion, savings mobilisation, and tax reforms. The goal, he said, is to move toward a model where a greater proportion of development financing is generated internally.
At the conference, which was themed “Building the Africa We Want Through Tax and Fiscal Policy,” Edun emphasised that Africa’s economic potential is immense — home to approximately 1.4 billion people and abundant natural resources — but that this promise can only be realised if the continent retains more of its financial resources and uses them productively. He highlighted that Nigeria, for example, has recently launched reforms such as the National Single Window project aimed at simplifying trade procedures, reducing transaction costs, increasing efficiency in customs processes, and ultimately broadening the tax base to boost government revenue.
Domestic resource mobilisation — particularly through improved tax systems — is at the heart of this strategy. Edun called for strengthened tax institutions that can collect revenue more effectively, coupled with enhanced governance mechanisms to close loopholes that allow capital flight. He argued that digitisation and technological tools should be leveraged to improve the efficiency and transparency of revenue systems, helping to ensure that public finances are robust and can support development priorities without excessive external borrowing.
The finance minister also pointed to the broader continental vision under the African Union’s Agenda 2063, which seeks to mobilise up to 90 per cent of development finance from domestic resources. Achieving this ambition, he said, will require cooperation among African states, regional coordination, and sustained reforms that prioritise economic diversification, institutional capacity building, and accountability.
Edun’s comments resonate with a growing discourse among policymakers across Africa that traditional development financing models, heavily reliant on debt and external aid, are unsustainable in an era of rising global interest rates, tightening credit markets, and increasing debt vulnerabilities. He urged African nations to strengthen regional trade and investment cooperation, build capital markets that can fund development internally, and pursue fiscal policies that are both prudent and growth-oriented.
Addressing illicit financial flows specifically, Edun said that combating tax evasion, aggressive profit shifting by multinational companies, misinvoicing of trade transactions, and other tactics used to transfer wealth out of the continent must be a continental priority. He pointed out that tackling these illicit channels not only strengthens public coffers but also enhances the legitimacy of tax systems and ensures that citizens and businesses contribute fairly to national development.
Nigeria’s broad economic reform agenda under President Bola Ahmed Tinubu’s administration underpins many of the themes raised by Edun, with a focus on macroeconomic stability, improved revenue collection, private sector-led growth, and fiscal responsibility. The minister’s address aligns with these priorities, emphasising that disciplined public finance, transparent governance, and strategic use of domestic resources are critical to reducing debt burdens and building resilient economies.
The growing attention on both reducing reliance on foreign borrowing and tackling illicit financial flows reflects a wider recognition across Africa that long-term economic sovereignty depends on countries controlling and maximising their own financial resources. By mobilising domestic revenues and stemming the loss of capital outflows, policymakers hope to support sustainable development pathways that are less vulnerable to external shocks and more responsive to the needs of their populations.
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