Absence of Effective Enforcement of Disclosure Requirements, Lack of Compliance by Companies Impeding Nigeria’s Transparency Register, Says World Bank

Mr. Ajay Banga, President, World Bank Group

The absence of effective enforcement of disclosure requirements and compliance by companies is one of the challenges impeding the realization of the full potential of the Beneficial Ownership Transparency (BOT) register, according to the World Bank, which is also proposing the adoption of “robust mechanisms” to verify the accuracy of the information provided by companies and to address non-compliance.

A report recently issued by the World Bank said although Nigeria has made significant progress in implementing BOT reforms, an assessment commissioned by the Bank identified several ongoing challenges that impede the register from reaching its full potential.

Titled “Beneficial Ownership Registers: Implementation Insights and Emerging Frontiers”, the 43-page report produced by the staff of the World Bank with external contributions distills insights from the implementation of Beneficial Ownership Registers (BORs) in Nigeria, North Macedonia, Kenya, and the United Kingdom.

According to the World Bank, “The experiences of these countries offer valuable lessons for similar reform efforts worldwide aimed at enhancing beneficial ownership transparency.”

Nigeria became the first African country to launch a digital beneficial ownership register for the extractives sector in 2019 and in 2020, Nigeria adopted legislation to strengthen BOT by amending the Companies and Allied Matters Act (CAMA), which then made it mandatory for companies to disclose their beneficial owners in a central register.

The Corporate Affairs Commission (CAC) subsequently published regulations on persons with significant control in companies, started collecting beneficial ownership data, and finally launched the new register in May 2023, calling it “Persons with Significant Control (PSC) Register”.

According to CAC data, as of June 5, 2023, there were 395,038 companies entered in the register, which is public and free to use, and accessible online at https://bor.cac.gov.ng/, while 1,313,033 beneficial owners were registered.

The World Bank said in the report: “The launch of the register represents the culmination of a multistakeholder effort that spanned several years. Despite significant challenges that persist, Nigeria has made considerable strides in BOT through efforts in advocacy, legislative reforms, capacity building, and the development of data capture and verification mechanisms.”

It noted that Nigeria has made significant progress in strengthening BOT over the past few years, recalling that the push for BOT in Nigeria originated in 2016 when the government, spurred on by civil society, publicly committed to fighting corruption at the 2016 Anti-Corruption Summit in London and subsequently joined the Open Government Partnership (OGP). Nigeria then embarked on the implementation of its First OGP National Action Plan (NAP) covering the period 2017 to 2019, which included a specific commitment to establish a central register of beneficial owners of companies.

Nigeria is the first African country to structure beneficial ownership data using the Beneficial Ownership Data Standard (BODS), which allows the data to be easily shared, combined, analyzed, and visualized. This facilitates data sharing with other government agencies, including the Bureau of Public Procurement (BPP), the Federal Inland Revenue Service (FIRS), and the Nigerian Financial Intelligence Unit (NFIU), among others.

The adoption of BODS is intended to further enable integration with other databases, such as the extractive industries register, and link them to global beneficial ownership data repositories. The BODS establishes a standardized format and structure for capturing and organizing beneficial ownership data.

According to the definitions used by Nigeria, a person is a beneficial owner of a company if the person holds at least 5 percent of the issued shares in the entity either directly or indirectly; or controls a customer and/or the natural person who exercises at least 5 percent of the voting rights in the entity either directly or indirectly, and holds a right directly or indirectly, to appoint or remove majority of the directors or similar positions of the entity; on whose behalf a transaction is being conducted; and/or exercises ultimate effective control over a legal person or legal arrangement, and exercises significant influence or control, directly or indirectly, over the entity.

The World Bank observed that a notable difference in the definitions used in Nigeria is the lower disclosure threshold of 5 percent, compared with 25 percent in the UK and the United States, which results in a larger pool of beneficial owners being subject to disclosure requirements, and has therefore led to a higher administrative burden on the CAC and on companies.

The report explained that Nigeria’s PSC register is cloud based and custom built with the CAC having an in-house technical team comprising software engineers who serve as support staff for the electronic register and form part of Commission’s Information and Communication Technology (ICT) Department, with about 30 employees.

It noted that the PSC register was built with financial support from the World Bank-financed Fiscal Governance and Institutions Project and a grant from the OGP Multi-Donor Trust Fund (MDTF), totaling $550,000 over a span of two years, adding that the World Bank financed key components of the register with a $400,000 allocation while additional budget items included user research, data management, policy compliance, stakeholder consultations, user trainings and outreach events dedicated to the PSC Register launch, and implementation support by World Bank staff and consultants.

The World Bank’s assessment is that the platform’s effectiveness as an anticorruption tool will now hinge on the extent to which internal and external users utilize it to uncover fraud and corruption, adding that further studies will be necessary to investigate the usage of the register and its correlation with expected anticorruption and Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) outcomes.

It said key indicators such as the frequency of interaction, measured through weekly or monthly visitor traffic, the number of data downloads or Application Programming Interface (API) calls, and other relevant statistics, can serve as an initial point for understanding user needs and behaviors on the platform.

Besides, the Bank noted, the number of corruption cases and prosecutions informed by BOT data within a specified period could serve as a metric for assessing the register’s value to Nigeria’s anticorruption efforts.

It said the experience of Nigeria in implementing BOT reforms highlights as key enabling factors sustained commitment at the highest political level, advocacy by civil society organizations (CSOs), and financial and technical support from development partners.

The Bank observed that “Political leaders, notably former President Muhammadu Buhari, have publicly endorsed and prioritized the issue of beneficial ownership, leading to its prominence on the government’s agenda. CSOs in Nigeria have demonstrated a longstanding commitment to driving policy changes, engaging with government agencies, and mobilizing public support for transparency and accountability. Collaboration with international partners, such as the World Bank and the Open Government Partnership, has further facilitated the exchange of expertise, resources, and global best practices. Collectively, these factors have been instrumental in the recent advances made in BOT in Nigeria.”

But it said although Nigeria has made significant progress in implementing BOT reforms, a recent assessment commissioned by the Bank has identified several ongoing challenges that impede the register from reaching its full potential, one of which is the effective enforcement of disclosure requirements and compliance by companies.

According to the Bank, despite the establishment of the register, there is a need for robust mechanisms to verify the accuracy of the information provided and to address potential noncompliance.

Additionally, it said, the capacity of government agencies, such as the CAC, needs to be strengthened to effectively manage and analyze the large volume of data collected.

It also identified another challenge as the need to enhance interagency coordination and interoperability to enable information sharing and facilitate the effective use of beneficial ownership data for investigations and enforcement actions.

The Bank stressed that sustained political commitment is necessary to ensure the continued prioritization of BOT reforms and to address any potential resistance or pushback from vested interests, adding that “overcoming these challenges will be crucial in realizing the full potential of Nigeria’s BOT system.”