Inside Lagos local government councils where officials divert taxes to personal bank accounts— 14mins read
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IT was drizzling in Lagos on Monday, February the 1st, 2021. The city was, as usual, boisterous and exacting. Vehicles and tricycles battled for supremacy. Motorcycles plied the city in large numbers, narrowing the little space meant for brisk-walking pedestrians.
A city with 3,577km area, yet with over 20 million residents fighting for survival.
Pedestrians and motorists were in a hurry, and the reasons were understandable. Nearly every part of the state is densely populated, with a soaring cost of living. Residents, therefore, must earn enough money to pay rents, cater for transportation and buy food.
“If you do not have enough money here in Lagos, you will have a tough life,” a resident of Lagos, Obinna Okechukwu, told the reporter when asked why everybody seemed desperate in Africa’s most populous city.
On Monday mornings, staff in many private and public offices in Lagos are usually in marathon meetings. Visitors come in after 10 or 11 am to enjoy unreserved attention. Armed with this knowledge, the reporter waited till 12:04 pm before visiting Amuwo-Odofin Local Government Area. His mission was simple: To find out if the desperation found in the street was also conspicuous at the local government council.
“Who are you looking for?” one friendly-looking gatekeeper asked.
“I wish to see those in charge of shop permits,” the reporter replied, posing as a trader.
In 2019, the reporter had exposed how two government officials in Lagos offered their personal bank accounts to traders to pay in official taxes and charges – to the detriment of the state and its treasury.
Traders who had paid such charges into personal accounts of government officials were reluctant to present their bank tellers to the reporter for fear of being victimised. More than two years after, the reporter had been told that such sharp practices were still going on at Lagos local government councils. However, like in 2019, nobody came forward with evidence. As a result, the reporter chose to go undercover to get evidence against the officials. Hence it would be difficult to unravel these practices without the covert reporting method.
Dodgy ‘Mr Alex’ at Amuwo-Odofin
At Amuwo-Odofin Local Government Area, people stood in groups. One set of people was in a single file, registering for the compulsory National Identification Number (NIN). Another group was made up of local government officials discussing in hushed tones. Others were mostly visitors who needed one service or the other.
“Who is in charge of trade permits here?” the reporter asked a stout, dark-complexioned man, who turned out to be an official of the council.
The official moved into a small room and came out two minutes after. “The person in charge of permits is not available now,” he told the reporter. The official offered the phone number of the man in charge.
Alexander Dele Olorunfemi was identified as the man in charge of trade and other shop permits. He gave his phone number to the reporter for further discussions. The reporter had posed as a trader who recently rented a shop at 23 Road in Festac (an important area within the local government) and needed to pay all shop permits to avoid being disturbed by officials. The reporter assumed a pseudonym, Ken Sagbor.
After a few minutes of phone discussions, Olorunfemi, popularly known as ‘Mr Alex,’ asked the reporter-turned-trader to pay N10,000 for Trade Permit and N1,000 for TV/Radio Permit – bringing the total sum to N11,000. However, Mr Alex made no effort to see the reporter or the shop in question.
The reporter verified from no fewer than five traders, and they confirmed that they paid for the same items when they started, though they all admitted to having paid less. Two said they paid N6,000, two others paid N7,000, and one trader recalled paying N7,500. All the payments were made between 2018 and 2020.
The reporter requested the local government account details for onward payment, but Mr Alex offered his own personal account details. He sent in a Polaris Bank account number, 1017489485, at 4:11 pm on February the 1st, to the reporter.
After paying in the money on February the 2nd, the reporter requested a payment receipt, but Mr Alex assured him that he should not worry. The reporter then told Mr Alex that he would be out of Lagos the following week and that his brother would stand in for him should anything arise. Mr Alex asked the reporter to “give my phone number to your brother, in case if you are not around for him to call me next week.”
The reporter then put a question to Mr Alex: “Is the receipt really important?”
“Yes, but if the receipt is not out on time, if any of my colleagues come to the shop…” Mr Alex replied.
Mr Alex’s statements were not complete. It was unclear whether it was caused by a network problem or was a deliberate way of leaving the message unclear. But two interpretations were deduced from Mr Alex’s words: Ask the reporter’s brother to call him if local government officials came calling or tell his brother to call him for the receipt next week.
However, the reporter found from a senior official of the local government that receipts were always ready once payment for any charge, tax or fee was made.
“It is a story for the gods. Receipts are ready any moment you pay,” the official at Amuwo-Odofin, who did not want her name mentioned for fear of reprisal, told the reporter.
The reporter asked a local government official at Ikeja Local Government Area about receipts, and he confirmed that they were always available and issued immediately upon payment.
Mr Alex did not provide the receipt till February the 21st, when the reporter ended further discussions with him.
Local Government chairman refused to respond
Chairman of Amuwo-Odofin Local Government Area Valentine Braimoh was contacted to answer various questions bordering on transparency at the local government council. The questions bordered on the official local government bank accounts for payment of trade and TV permits, the number of charges that traders were mandated to pay, and how he would handle cases where individuals at the council allowed traders to pay official fees and charges into their personal accounts. A text message was sent to his phone number on March 15, but he did not respond. Calls were placed across to him, but he did not pick.
Four WhatsApp messages were sent to him between March 15 and March 17, and the freeware indicated that he read the messages, but he did not respond as of the time of filing this report -more than one month after.
Same in Surulere
Surulere is an important local government council in Lagos comprising Ojuelegba, a crowded suburb bordered by Yaba, Mushin and Ebute-Metta. Ojuelegba is a typical reflection of the hurly-burly life in Lagos as it looks lively even at 1 am. After visiting Amuwo-Odofin, the reporter headed for Surulere local government secretariat, seeking the department in charge of new shops.
He was asked to wait for the man in charge, who appeared 23 minutes later. “What do you want?” he asked. The reporter explained that he had a shop at Ojuelegba Road and wanted to pay all the necessary charges to avoid being disturbed by touts. After a few minutes of discussions, Tunde Mustapha, the man in charge of what was described as ‘Lock-Up Shop,’ told the reporter to pay N10,000.
‘Lock-Up Shop’ is a yearly charge imposed on traders by some local government councils in Lagos. It was not clear why Surulere mandated traders to pay up the charge. However, it was found that shop owners who did not pay the charge would have their shops locked up.
Before leaving his office, Mustapha had offered bank account details to the reporter – which turned out to be his. It was a Polaris Bank account with the number 1012088388. He told the reporter to pay the local government charge into the account.
The following day, the reporter paid the money into his account, asking him to confirm receipt. He replied ‘Ok’ in a text message, acknowledging receipt of the money.
Before paying the money, Mustapha had wanted to visit the shop. Unlike Mr Alex, who did not care whether the address given to him existed or not, Mustapha was keen on knowing the shop location. He demonstrated knowledge of shop locations at Surulere and wanted to confirm whether the reporter’s supposed shop was big or small. This was on February 2. However, the reporter told Mustapha that he would not be around that day – which was the day payment was made.
Between February the 2nd and 21st, however, Mustapha did not call the reporter. Nor did he demonstrate that he visited the shop to find out if it even existed. He neither provided an official receipt to the reporter nor communicated with him after February the 2nd.
Drama by Surulere local government chairman
Several calls were put across to Surulere Local Government Area Chairman Tajudeen Ajide Yussuff between March 15 and 17, but he did not pick. A text message bearing similar questions sent to Amuwo-Odofin chairman was sent to him, but he did not reply. However, after the reporter had sent three WhatsApp messages, he replied on March 17, at 7.29 am, “Please, mind your conclusion and your accusations on this matter. Surulere local government is not LCDA AT ALL. Furnished (sic) me with the proof. Thanks.”
The reporter replied that there were no allegations in the questions, reminding him that the essence of hearing from him was to adhere to the principle of fairness.
Two hours after his first response, he requested the reporter to “send a petition and proof of invoices, and the receipt served the person or group of people,” but the reporter reminded him that he had no obligation to present evidence to him directly. A few days later, he sent a WhatsApp message to the reporter, saying, ” I am still waiting for you.”
Yussuff did not answer any of the questions raised by the reporter. He also failed to answer whether it was lawful in his local council to pay official charges and taxes into individuals’ accounts.
“Give me cash” at Igando-Ikotun LCDA
The situation was slightly different at Igando-Ikotun Local Council Development Authority (LCDA), where the reporter also posed as a trader in one of the plazas. He was directed to ‘Mrs Omirin’, whom Truecaller identified as Omirin Abidemi. She was in charge of ‘Lock-Up Shops’ at the local council. But unlike others, Abidemi told the reporter that she was an accountant and would not want the money paid into her account.
She told the reporter to give her N12,000 in cash as payment for Lock-Up Shop, promising to send ‘her staff” to pay the money at the appropriate quarters and obtain the receipt on his behalf.
However, the reporter insisted on having the local council’s bank account details. Still, Abidemi told him that should he pay the money into the local government official bank account, “to generate the receipt will be very difficult.” She asked the reporter to give her cash any time he was free, promising to help him get the required receipt. Her conversation with the reporter was recorded.
Though she asked questions about the shop location, she made no effort to confirm whether the reporter was telling the truth or not.
Local council chairperson denies claims by tax collector
However, Abidemi’s claims were rubbished by Chairperson of Igando-Ikotun LCDA Morenike Adesina-Williams, who described paying official fees or charges in cash as ‘fraudulent.’ Adesina-Williams said her LCDA had a bank account sent to “people we send E-Billing to.” However, she did not provide the account details as requested by the reporter and did not answer the question regarding the number of charges in her LCDA.
“Good morning, have called cda’s meeting, told them dis answers, also warned them through born FM, against giving cash to our people, gave them the LCDA account numbers, I will appreciate if u can confide in me dis people so as to generate more IGR,” she sent this WhatsApp message to the reporter on March 17.
When pressed to answer other questions bordering on transparency in her local council, she replied to the reporter, ” Oga, pls I can’t talk more than what have said. If u see anyone collecting illegal money, do whatever u like with him or her. Also, those people giving them such money should be blamed after all announcements and meetings with the masses. U can see my P A or Council Treasurer for any other thing. Thanks, and take care.”
It was unclear why she referred the reporter to her personal assistant or ‘Council Treasurer’ after refusing to answer questions bordering on the number of charges paid by traders and local government’s account details.
Lagos Commissioner for local government did not respond
The reporter contacted Lagos State Commissioner for Local Government and Community Affairs Wale Ahmed, on March 16, but the commissioner complained that he could not hear what the journalist was saying.
He then told the reporter to send a text message. Two text messages were sent to him bordering on transparency issues at local governments in Lagos, but he did not reply. He also did not reply to four WhatsApp messages sent to him.
Past linked to present
In 2019, the reporter also found two officials in Lagos using their personal accounts to receive government charges. He found an official of the Lagos State Signage & Advertisement Agency (LASAA) Assumpta Omozejele using her Zenith Bank account to receive LASAA charges at Isolo LCDA.
The reporter visited her office and told her he was constructing a three-square-foot signpost. She asked the reporter to pay N14,784 for that, including N6,000 for registration and N7,392 (50 per cent of the original rate) for advertising -N28 176 in total. She ‘prorated’ the payment and asked him to pay N15 000 for the whole of 2020. In a recorded phone call, she reduced the amount to N13 000 and read out her account number to the reporter, who later paid the agreed amount on December 10, 2019, and demanded a receipt in a text message the following day.
“Don’t worry, it does not matter am the only one in charge of Ajao, but if you still want it, you can come around,” she replied in an unedited text message. LASAA later suspended Omojezele and her team, and the agency did not collect charges from traders till April 12, 2020, when the reporter put out a report.
At Mushin LCDA, the journalist met a man, Aliu Olaoye, who claimed to work as a task force team member. The reporter told Olaoye that he had a shop at Isolo Road and needed to pay all necessary fees. Olaoye asked him to pay a parking permit of N30,000 and a shop fee of N5,500 into his Polaris Bank account. In a recorded telephone call, he promised to pay the reporter’s N20,000 into Mushin Local Government’s account, while he and ‘the leader’ would pocket N5,000 each.
“Oga, this is Mushin. As you know me, nobody will touch you except the person who wants to die,” he had told the reporter.
The reporter finally paid N5 000 into his account, with a promise to pay the rest later.
Lawyers say culprits can go to jail
An expert in criminal law, Samuel Oyigbo, told The ICIR that the act was a serious crime that could attract seven- to a 14-year jail term.
“It is fraudulent conversion and involves different crimes. It is a criminal diversion of fund, as is found in Section 419 of the Criminal Code,” he said.
Oyigbo said apart from being a criminal breach of trust, the suspect or culprit could be charged with stealing, which could carry seven or more years of jail term.
“In criminal prosecution, people are served based on the more severe crimes. When you allow people to pay official charges into your account, it becomes stealing, fraudulent diversion or obtaining by pretence. That you are charged for one does not mean you can’t be charged for another at the same time,” he explained.
This was re-echoed by Adepeju Jaiyeoba, a lawyer and entrepreneur, who said it was a criminal offence. She explained that as long as receivers were not authorised to collect the charges or taxes through their personal accounts, it would be serious.
“Are you an authorised revenue collector? Are there no proper channels? Why are you presenting your personal bank accounts for that? That is fraudulent conversion under the Criminal Code,” she noted.
The ICPC responds
Spokesperson for the Independent Corrupt Practices and Other Related Offences Commission (ICPC) Azuka Chinelo Ogugua said government officials might receive public funds into their personal accounts up to a limit of N200,000.
“But they may not receive taxes which are usually paid into a government account,” she said.
When asked whether the ICPC could arrest local government officials presenting their personal bank accounts for such charges, she explained that the body was authorised by law to arrest anybody at any level.
“The ICPC arrests culprits at the Federal, State and Local Government Levels because the ICPC Act applies to all Nigerians. ICPC would prosecute any culprit after thorough investigations are carried out, and a prima-facie case is established against them,” she explained.
Spokesman of the Economic and Financial Crimes Commission (EFCC) Wilson Uwajeren did not pick The ICIR‘s calls. Neither did he respond to text and WhatsApp messages sent to him regarding the issue. He hardly responds to request for information for public use.
Ikeja Local Government shows example
At Ikeja Local Government Area, the reporter met a man who introduced himself as ‘Mr Kazeem.’ Truecaller identified him as Kazeem Ashade. As usual, the reporter told Mr Kazeem that he wanted to pay for shop charges. Unlike others, Mr Kazeem provided a Zenith Bank teller to the reporter, asking him to pay for a shop permit (N7,500) and Radio/TV License (N1,000) into the local government’s official bank account.
He did not indicate any interest in collecting the money in cash, nor did he want the charges paid into his account.
Little drops of water
The reporter found that it was normal for Tunde Mustapha and Mr Alex to provide their account numbers to petty traders whenever they needed to pay government levies or fees.
Though now a cliched expression, language experts believe that little drops of water make the mighty ocean. With thousands of shops at Surulere Local Government Area, should 500 traders pay N10,000 ($24) into Mustapha’s bank account, the account holder would have N 5 million ($12,195) in the tills.
On the other hand, if 500 traders pay N11,000 into Mr Alex’s account, he would have N5.5 million ($13,414) in the bank.
This explains why issues of transparency should be taken seriously, financial experts say. Economist Iraj Abedian of South Africa said such practices often robbed the poor.
Tax fraud and impact on Nigerians
Tax fraud happens at both individual and corporate levels. Apart from government officials who steal tax revenues, companies too dodge taxes in the form of avoidance or evasion.
Tax evasion occurs when a person or firm deliberately avoids paying taxes. It is often illegal. On the other hand, avoidance is “the use of legal methods to minimize the amount of income tax owed by an individual or a business,” Investopedia explains.
Executive Chairman of the Federal Inland Revenue Service (FIRS) Muhammad Nami said in January 2021 that Nigeria lost $178 billion to tax evasion by multi-nationals in 10 years.
A 2018 report by the Partnership for Social and Governance Research cited another research work by the High-Level Panel on Illicit Financial Flows from Africa, which showed that Nigeria accounted for 30.5 per cent of illicit financial outflows ( including taxes) from the continent.
The research by the Partnership for Social and Governance Research explained that tax fraud also manifested in the form of smuggling or diversion of oil exports, leading to huge losses in revenue.
It further said that Africa’s most populous nation lost $217.7 billion to illicit financial flows (including tax outflows) between 1970 and 2008.
“The drivers/enablers are: poor governance, weak regulatory structures, and existence of financial secrecy jurisdictions and tax havens outside Nigeria,” the report said.
An Oxfam International’s recent report on tax dodging noted that the losers of tax fraud were ordinary people and poor countries.
“Governments either have to cut back on these services, or make up the shortfall by collecting higher taxes from everyone else,” the report said.
“Both options see the poorest people lose out and the inequality gap grow. This global system of tax avoidance is sucking the life out of welfare states in the rich world.”
In Nigeria, inequality is widening. About 105 million citizens (out of 205 million) lived in extreme poverty in 2020, the World Poverty Clock said. Unemployment was 27 per cent in the second quarter (Q2) of 2020, according to the National Bureau of Statistics (NBS).
The Lagos Chamber of Commerce and Industry (LCCI) is anticipating that the unemployment figure, when released, will hang around 35 per cent by the end of 2020 due to COVID-19 impact.
“…the ability to combat crimes of fraud and corruption is a task that is largely dependent on the legal and political instruments of state, which determines the effectiveness of the anti–corruption campaign,” Uche Jack-Osimiri and Bariyima Sylvester Kokpan wrote in a 2020 paper entitled, ‘Fraud and Corruption in Nigerian Taxation: Eradication or Control.’
Solution: Digital payment
Findings by this reporter in more than 15 local councils in Lagos showed no provision for digital payment facilities. At local councils in Ikeja, Igando-Ikotun, Surulere, Amuwo-Odofin, Apapa, Bariga, and Ejigbo, the situation was the same.
This is different from what obtains in Kenya. In the East African country, Safaricom-managed M-PESA has enabled 35.6 million adults to access financial services.
Individuals are requested to register in M-PESA with national identity cards and
Safaricom SIM cards. Once registered, they deposit money with local M-PESA agents, obtaining an ‘e-float,’ which is M-PESA’s digital currency. This can then be exchanged with another M-PESA subscriber in the form of an SMS. This has enabled millions of Kenyans to pay bills at state and local government levels on a cashless basis, reducing corruption and fraud brought about by cash and bank payments.
In a paper entitled, ‘Using Electronic Payment Programs As An Anti-Corruption Strategy,’ Olayemi Abdullateef Aliyu, Samuel Ekundayo and Chris Arasanmi explained that Malaysia used the ICT, especially digital payment platforms, to reduce corruption at all levels of government.
“It has been assessed that electronic payments, when used well, have the potential to significantly
reduce the cost of cash management and transactions, and curb corruption such as bribery by 47 per cent,” they said, quoting an earlier work by P. L. dos Santos & Harvold Kvangraven.
Digital payment industry in Nigeria is growing at a faster pace. Flutterwave recently hit $1 billion valuations, proposing to list at the New York Stock Exchange in no time. Stripe recently acquired Nigeria-founded Paystack at $200 million. There has also been a steady growth by Remita, Interswitch, Amplify, among others, but local governments in the country are still reluctant to employ them, analysts say.
A Chartered Accountant, Bala Augie, advised local governments in Lagos to embrace digital payment, saying that doing so would eliminate corruption and place them on the global pedestal.
“It is easier than going to the bank to make payment. It also helps start-ups to grow,” he said.
“It is important to plug these loopholes and use the money for the people.”
Group Head of Tax at the United Bank for Africa (UBA) Emeka Amadi suggested the need to clarify the number of taxes paid by businesses, stressing that all taxes must be paid into designated bank accounts.
He stressed the importance of punishing erring officials to serve as deterrent to others.
In 2019, director-General of Lagos Chamber of Commerce and Industry Muda Yusuf said most of the financial inaccuracies and inconsistencies were found at local governments than the state government.
“We need to put technology in place,” he suggested.
“Urge people to pay into the bank and monitor the process,” he further said.
Managing Director of a servicing firm MD Services Limited Ike Ibeabuchi said politicians should not use public offices to compensate individuals after elections.
“People who pay these fees into private accounts should know they are taking a risk. So, they should also be bold enough to report any official who wants public funds paid into their private accounts,” he suggested.