Onome Amuge
The International Monetary Fund (IMF) has urged Nigeria and other emerging economies to intensify their crackdown on illicit financial flows, warning that unchecked “dirty money” poses a serious threat to financial stability, public trust, and global investor confidence.
Kristalina Georgieva, IMF managing director, speaking at a Civil Society Town Hall during the IMF–World Bank Annual Meetings in Washington, said the scale of illicit finance in many developing countries has reached a level that undermines governance and risks derailing economic reform efforts.
“Illicit financial flows — what we call dirty money — undermine stability and public trust. Five to ten years ago, this was underestimated; today, it is central to our analysis and policy advice,” Georgieva said.
The hidden cost of dirty money
The IMF estimates that developing economies lose tens of billions of dollars annually through illicit capital flight, tax evasion, and corruption-related transactions; funds that could otherwise boost infrastructure, education, and healthcare systems.
In Nigeria, illicit financial flows have long been a systemic challenge. The country ranks among the world’s top sources of illicit capital outflows, with decades of oil theft, financial misreporting, and politically connected graft sapping the economy’s potential.
Analysts warn that this pervasive leakage has also deepened public distrust in institutions and deterred foreign investment, even as Nigeria pursues ambitious reforms to stabilise its exchange rate and attract capital inflows.
Georgieva’s warning, therefore, is as much about rebuilding confidence as it is about tackling corruption. The IMF chief noted that the Fund’s latest governance initiatives aim to help countries close loopholes that enable illicit transfers while improving fiscal transparency and debt reporting.
Governance as economic policy
In a departure from its traditional macroeconomic focus, the IMF now integrates anti–money-laundering and governance diagnostics into its Article IV consultations and lending programmes. These assessments are designed to identify structural weaknesses in public financial systems and prevent small lapses from evolving into systemic crises.
“The governance diagnostic tool is not an audit; it is a preventive measure. We encourage governments to work with civil society organisations that often know the system’s weaknesses best. Working together makes our efforts more credible and effective,” Georgieva said.
The Fund has also unveiled a new Anti–Money-Laundering and Combating the Financing of Terrorism (AML/CFT) Strategy, which will be applied across member countries to strengthen oversight, improve debt transparency, and align financial systems with global best practices.
The move represents a broader effort by the IMF to ensure that financial reforms are not undermined by corruption or opaque fiscal practices; a persistent issue in several African and Latin American economies.
Nigeria’s institutional test
For Nigeria, the IMF’s message comes at a time of a noticeable economic strain. Although the country has seen some improvements in fiscal discipline under the current administration, the Fund warned that these gains stem largely from limited access to finance rather than genuine fiscal sustainability.
“While Nigeria and some low-income nations have recorded slight reductions in debt ratios, the improvement was largely due to constrained borrowing. That is not the same as having a credible debt management strategy or strong institutional accountability,” Georgieva said.
The IMF’s focus on governance resonates deeply in Nigeria, where recent scandals, ranging from foreign exchange mismanagement to opaque oil subsidy accounting, have drawn public outrage and raised questions about the effectiveness of anti-corruption agencies.
Georgieva urged governments to deepen collaboration with civil society groups to strengthen transparency in public financial management, arguing that independent oversight is key to preventing the capture of state institutions by vested interests.
“Governments must deliver transparent, people-focused policies or risk losing social cohesion. We are seeing young people across countries take to the streets because they have lost faith in institutions,” she observed.
The call reflects growing concern that democratic backsliding and economic inequality in parts of Africa could fuel political instability. In Nigeria, where youth unemployment remains above 30 per cent, public frustration over corruption and poor governance has intensified.
The IMF’s evolving stance on governance and illicit finance is also part of a larger recalibration of global economic policy. The Fund, traditionally viewed as a fiscal disciplinarian, is increasingly positioning itself as a guardian of institutional integrity, integrating anti-corruption and AML measures into the heart of its economic surveillance.
Georgieva said the Fund is working closely with the World Bank, the G20 Common Framework, and the Global Sovereign Debt Roundtable to promote greater transparency in debt restructuring and financial reporting.
“The aim is not only to strengthen financial systems, but to create an environment where entrepreneurship and job creation can thrive, especially across Africa’s young economies,” she said.
