Anti-corruption activists say inactive companies are often used to secure public contracts while concealing politically exposed persons and ultimate beneficiaries.
Nigeria’s hard-won progress on financial transparency is facing a fresh threat as thousands of inactive companies on the platform of the Corporate Affairs Commission (CAC) continue to operate bank accounts without restrictions, potentially undermining reforms that helped the country exit the global anti-money laundering grey list.
Findings by PREMIUM TIMES show that despite regulatory red flags, many of these entities remain fully active within the financial system, raising concerns about weak enforcement, regulatory disconnect, and the possibility that shell companies are being used for corruption, terrorism financing, procurement fraud, and illicit financial flows.
Official CAC data obtained by PREMIUM TIMES as of 14 April shows that Nigeria has 7,039,099 registered entities. Of this figure, only 3,202,042 are classified as active, while 3,688,101 are inactive companies.
Under CAC rules, a company becomes inactive when it fails to meet statutory obligations such as filing annual returns, disclosing beneficial ownership, or updating records relating to directors, addresses, or business objectives.
Regulatory and enforcement officials say the designation is more than an administrative classification just as transparency experts describe it as a major compliance and integrity risk because such entities often operate with outdated or undisclosed ownership structures.
Yet many of these inactive companies continue to maintain fully operational bank accounts and conduct transactions without apparent restrictions.
Officials at the CAC say many companies deliberately chose inactive status rather than comply with beneficial ownership disclosure requirements introduced as part of Nigeria’s anti-money laundering reforms.
“They preferred to remain inactive rather than disclose their real owners,” CAC Registrar-General Ishaq Magaji told PREMIUM TIMES.
He warned that the companies continue operating because banks have not imposed meaningful restrictions on them despite their status on CAC records.
“This is a serious problem to our financial system,” he said.
CAC spokesperson Rasheed Mahe said the commission had repeatedly alerted banks to the risks posed by inactive companies.
According to CAC insiders, the commission wrote to managing directors of banks advising them to treat inactive companies as red flags and subject them to enhanced scrutiny.
However, the officials said many financial institutions have continued to treat the advisories “with levity.”
“Blocking inactive companies from financial services is a compliance issue that all legal departments of banks should be aware of and adhere strictly to,” Mr Mahe said.
The Central Bank of Nigeria (CBN) did not officially respond to PREMIUM TIMES’ inquiry on what actions it was taking regarding CAC’s concerns.
However, a senior official at the apex bank, who requested anonymity because he was not authorised to speak publicly, said the regulator was aware of the issues.
“The Bank takes issues relating to financial system integrity, transparency, and regulatory compliance very seriously,” the official said.
He said the CBN was working with relevant agencies, including the CAC, to strengthen Know Your Customer (KYC), Customer Due Diligence (CDD), and account monitoring systems across the banking sector.
According to him, banks are already required under existing regulations to periodically update customer records and ensure that corporate account holders remain duly registered and compliant with applicable laws.
The official added that the CBN had issued several guidelines relating to anti-money laundering (AML), counter-terrorism financing (CFT), beneficial ownership transparency, and risk-based supervision.
“Financial institutions found to be in breach of these regulatory requirements are subject to appropriate supervisory and regulatory sanctions,” he said.
He also disclosed that the apex bank was engaging stakeholders to improve data-sharing mechanisms and deepen inter-agency collaboration.
“The CBN has reiterated its commitment to safeguarding the stability, credibility, and soundness of Nigeria’s banking system in line with global best practices,” he added.
Commenting on the development, Umar Yakubu, Executive Director of the Centre for Fiscal Transparency and Public Integrity (CeFTPI), warned that inactive companies are often used as fronts to secure public contracts while concealing politically exposed persons and ultimate beneficiaries.
“These are entities that may exist largely on paper,” Mr Yakubu told PREMIUM TIMES.
“They may fail to file annual returns, which can limit visibility into their financial position, changes in directorship, or Persons with Significant Control (PSC).”
According to him, such opacity creates fertile ground for abuse of public procurement systems, diversion of public funds, and contract fraud.
“In some cases, such entities can be used as front companies to pursue contracts while obscuring beneficial ownership or accountability, increasing the risk of non-performance and misuse of public funds,” he said.
He cited investigations into the Federal Ministry of Humanitarian Affairs, Disaster Management and Social Development in 2024, during which the Economic and Financial Crimes Commission (EFCC) reportedly uncovered billions of naira funneled through corporate accounts linked to officials and their associates.
According to him, several companies involved in the consultancy and contract payments were either unregistered with the CAC or were inactive entities with no physical address or verifiable delivery track record.
