Illicit Financial Flows, Tax Evasion, and Domestic Revenue Mobilisation in Nigeria

This study empirically analyses the scale and channels of illicit financial flows (IFFs) linked to tax evasion and their implications for domestic revenue mobilisation in Nigeria. Illicit financial flows, including trade misinvoicing, offshore profit shifting, and informal sector revenue concealment, represent one of the most significant constraints on Nigeria's tax revenue capacity. Despite growing international attention, comprehensive empirical studies linking IFF methodologies to domestic revenue loss estimates within the Nigerian context remain limited. Using a mixed-methods design, the study applies the trade misinvoicing methodology, derived from IMF Direction of Trade Statistics and Nigerian customs data, to estimate annual revenue losses attributable to import and export misinvoicing over a ten-year period. These estimates are complemented by a structured survey of 50 customs agents, trade financiers, and tax professionals in Lagos and Apapa. Regression analysis links trade-based IFF estimates to annual FIRS revenue underperformance against IMF revenue potential benchmarks. The study expects to find that import misinvoicing alone contributes revenue losses exceeding one trillion naira annually, with trade in intermediate goods being the most mispriced category. Recommendations include strengthening Customs and FIRS data sharing, mandating electronic cargo tracking, adopting the OECD automatic exchange of information standard for offshore accounts, and criminalising trade misinvoicing under the Money Laundering Act. Keywords: illicit financial flows, tax evasion, trade misinvoicing, domestic revenue mobilisation, Nigeria.