Dubai Property: An Oasis for Nigeria’s Corrupt Political Elites

THE SCALE AND SIGNIFICANCE OF NIGERIAN PEPS’ DUBAI PROPERTY HOLDINGS

• The 800 Dubai properties linked to Nigerian PEPs are estimated to be worth well over 146 billion naira (N) ($400 million). This equals roughly two-thirds of the Nigerian Army’s annual budget and over three times the annual budget of the country’s Independent National Electoral Commission.
• Dubai property ownership is an indicator not definitive proof that a particular politically exposed Nigerian possesses unexplained wealth. Although many PEPs’ property purchases exceed what their official salaries should permit, some politically exposed Nigerians have complicated personal financial portfolios combining marital and family assets, business holdings, charitable foundations, and other offshore wealth. Only Nigerian law enforcement agencies, working with their Emirati and international counterparts, can determine conclusively whether an individual’s property was purchased with the proceeds of corruption. Except where reference is made to factual matters concerning specific identified individuals, this paper should not be read as making any general allegations of unexplained wealth or ill-gotten gains concerning any of the individuals or corporate entities it discusses.
• Nigerian elites face few obstacles transferring large quantities of cash to Dubai. Banks or other money transfer agents in both Nigeria and the UAE do not appear to be reporting large or otherwise suspicious transactions by PEPs to national authorities. Unless Emirati and international authorities strengthen checks on such activities, questionable financial outflows from Nigeria to Dubai will continue to grow.
• Dubai property ownership cuts across all of Nigeria’s elite political, ethnic, and religious groups. The city hosts politically exposed Nigerians from across the country, not just its northern Muslim elites. The Sandcastles data are broadly representative of Nigeria’s geographically and ethnically diverse political class.
• In contrast to their Nigerian peers, Kenyan PEPs are linked to just a handful of Dubai properties. Given that Kenya also suffers from high levels of official corruption, it is unclear why the Dubai property market has not absorbed more of the country’s illicit financial outflows. An explanation might be that Kenyan elites use proxies and shell companies more effectively and systematically or that the country’s law enforcement and regulatory agencies are more effective than those in Nigeria.

POLICY IMPLICATIONS, CONSTRAINTS, AND PROSPECTS

• Nigerian PEPs’ purchase of Dubai property if carried out using ill-gotten gains is a serious political and socioeconomic concern rather than a nuisance or victimless activity. Dubai’s receptivity to dubiously acquired funds fuels and incentivizes the looting of Nigeria by its kleptocratic elites. An unknown proportion, perhaps substantial, of the over $400 million they have used to buy Dubai property could be part of a river of illicit financial flows out of Nigeria, which the think tank Global Financial Integrity conservatively estimated to total $178 billion from 2004 to 2013.⁵
• Any Western governmental efforts to stem illicit financial outflows from Nigeria to Dubai will be constrained by strategic considerations. The United States, United Kingdom, and many European governments enjoy close diplomatic, military, financial, and institutional ties to the UAE. They therefore lack leverage over Emirati decisions, making it difficult to apply coordinated and sustained pressure on the country’s officials on sensitive issues like this one.
• Nigerian law enforcement agencies could seize upon some underexploited opportunities to deter PEPs’ illicit acquisition of Dubai property. The Nigerian government could launch an interagency investigative panel to scrutinize the last ten years’ worth of financial transfers between Nigeria and Dubai, flagging suspicious transactions that may have been ignored or previously overlooked.
• Emirati authorities arguably have the greatest responsibility and strong incentives for preventing Nigerian PEPs from laundering money through the Dubai real estate market. If Dubai becomes a central port for spoils and a haven for kleptocrats, its attractiveness to mainstream investors could fade over the long term. Unlikely to embrace one-sided reforms that hurt their global competitiveness, Emirati authorities may be willing to buy into broader international fixes such as increased transparency of company ownership records that impact all jurisdictions equally.

Nigerians enjoy a special connection with Dubai in the United Arab Emirates (UAE). For Nigeria’s politically exposed persons (PEPs) and their associates, Dubai is a welcoming destination for any unexplained wealth they accrue. PEPs are current or former political elites who are inherently at higher risk of carrying out illicit activity due to their position of power. For Nigerian PEPs who succumb to the temptation, Dubai is a place where they can relax and enjoy such gains away from the prying eyes of anticorruption agencies, journalists, and civil society watchdogs. And, for many, property ownership is a key way to fully unlock this privileged lifestyle.

Dubai specializes in selling high-end properties whether modest serviced apartments, luxury penthouses, or spectacular villas to the world’s richest elites. Indeed, Dubai’s rapid growth and development over the last four decades has been underpinned by its booming real estate market. With the strong financial backing of Abu Dhabi the UAE’s capital and home to over 99 percent of its oil production Dubai is also now one of the world’s premier commercial and banking centers. But, in part because of its success, it has become an attractive portal for illicit money flowing into the global financial system.

For politically exposed Nigerians, however, Dubai’s appeal runs even deeper. There are four reasons that, when taken together, explain why Dubai’s property market is a particularly enticing destination for Nigerian elite investment:

1. Accessibility. Dubai is a major transportation hub and the home of Emirates Airlines, which is ranked fifth out of all airlines worldwide in terms of the number of countries it serves.⁶ For Nigerian elites, Dubai is as easy to reach as London, England, and more accessible than U.S. cities New York or Miami. Emirates Airlines flies to Dubai twice daily from Lagos, Nigeria, and once daily from Abuja, Nigeria. It is also much easier for a Nigerian to get a UAE visa than it is for them to get a visa for the United States or United Kingdom. A thirty-day tourist visa to the UAE only costs N30,000 ($83) and takes about a week to process. There is no need to have legal residency or a permit to buy property in Dubai.⁷ As a result, the number of Nigerians traveling to Dubai continues to rise. Nigerian arrivals increased 28 percent in the first half of 2019 (compared to the same period in 2018), vaulting Nigeria for the first time onto the list of top twenty countries sending international visitors to Dubai.⁸
2. Permeability. Dubai is a welcoming business environment for not only legitimate businesses but unlawful ones as well. Both types can easily buy property in and transfer money to Dubai. As of 2018, the U.S. Department of State assessed the UAE to be a “major money laundering jurisdiction,” as defined by the Foreign Assistance Act of 1961.⁹ In the words of a former sales manager at a major UAE property company, “There are not the same checks on the sources of money coming into Dubai as there are in London and elsewhere.”¹⁰ Dubai’s property market is especially vulnerable to money laundering because the emirate enjoys a strong banking system but weak financial regulations, champions rapid and aggressive business growth, and exercises minimal oversight of corporate and property registration practices.¹¹
3. Reliability. Buying property in Dubai has long been a relatively safe investment because of the emirate’s strong links to the international financial system, stable governance, and investor-friendly policies. Government efforts to stabilize property prices may further improve the long-term reliability and profitability of Dubai real estate. In September 2019, Dubai’s ruler created the Higher Committee for Real Estate Planning, a supervisory body chaired by Sheikh Maktoum bin Mohammed, who is Dubai’s deputy ruler and the third son of Dubai’s current ruler.¹² Made up of top emirate officials, government investment bodies, major property developers, and urban planners, the committee is tasked with better regulating housing supply and demand.¹³
4. Affordability. Dubai property is also a relatively affordable entry point for Nigerian elites seeking to climb the international property ladder. In 2019, a global real estate firm ranked it third out of twenty global cities behind only Cape Town, South Africa, and Sao Paulo, Brazil in terms of how many square meters of prime property $1 million can buy.¹⁴ Dubai also has some of the lowest property fees (in other words, taxes) in the world, averaging just 3.6 percent over a five-year period.¹⁵

These alluring factors are evident, yet specific details on the scope and scale of Nigerians’ presence in Dubai are difficult to obtain. This lack of information is not unique to Nigerian linkages to Dubai; it reflects the overall lack of literature and in-depth analysis on the role of the emirate and its luxury property market as a conduit for global illicit financial flows.

This is not simply an academic oversight; study and discussion of Dubai’s problematic role appears to be discouraged by Emirati authorities concerned about protecting the country’s positive international image, attractiveness to international investors, and strong relationship with the United States, United Kingdom, and European governments.¹⁶ Leveraging its dynamic diplomatic corps, top-notch lobbyists and public relations firms, and generous donations to world-class think tanks and universities, the Emirati government has tried to neutralize potential critics.¹⁷

Thus, research on this topic is scarce. In its report Sandcastles, the Center for Advanced Defense Studies (now known as C4ADS) examined how seven individuals sanctioned by the United States or European countries were linked to property in Dubai. Likewise, the Tax Justice Network’s 2018 Financial Secrecy Index provides in-depth analysis of the emirate’s role as a destination for global illicit financial flows, stating that it has “an ask-no-questions, see-no-evil approach to commercial and financial regulation as well as foreign financial crimes.”¹⁸ The index ranks Dubai as the ninth most secretive jurisdiction in the world (out of 112).¹⁹

In his 2010 book Dubai: Gilded Cage, Syed Ali highlights the close connection that Emirati government policies have long had with the needs of developers keen to market upscale properties to international buyers.²⁰ This includes Dubai’s 2002 decision to grant property ownership rights to noncitizens and issue residence visas to those who bought real estate.²¹ Ali also explains how “Dubai has become the Gulf’s money laundry,” noting that this activity is “really an extension of the smuggling trades that had been part and parcel of Dubai’s development.”²² Without accusing Dubai’s rulers of active complicity, Ali notes that they have “[turned] a blind eye in the interests of keeping commerce generally as free and uninterrupted as possible.”²³

The purpose of these assessments and this paper is not to tarnish reputations, whether Emirati or Nigerian. The research here focuses on assessing the extent of Nigerian PEPs’ ownership of property in Dubai, the types of Nigerian PEPs linked to property, and the legal and logistical obstacles to purchasing property. The intent is to provide fresh evidence and analysis capable of generating policy solutions that could help Nigeria on track to be the world’s third most populous state by 2050 to address a particular manifestation of elite corruption.²⁴ It is also to proffer policy recommendations for Nigerian and Emirati officials as well as Western governments and international financial regulators.

For Nigeria to address its worsening poverty rate which is as high as 52 percent in rural areas as well as its many other daunting socioeconomic, governance, and internal security challenges, it needs to curb outflows of cash being embezzled by some of its top office holders and public servants.²⁵ Ignoring this phenomenon would ensure that Dubai property remains an attractive conduit for illicit financial flows from Nigeria for decades to come. Over time, these outflows will drain government coffers, drive up borrowing, and put further pressure on the naira, Nigeria’s perennially struggling currency.