ABSTRACT
Corruption has been a major concern and topical issues in the private and public sectors of Nigerian economy over half century ago, since the discovery of oil in Nigeria in the mid-1950s. This paper seeks to explore the effects of corruption on Nigerian Economy. Various writers have contributed to this ranging from academics to NGOs.
This paper employed the use of secondary data, through reviews of related literatures and theories. It found out that effects of corruption on Nigerian economy include, but not limited to, Depletion of National Wealth , Inflation, Imbalanced economic development, Weakling work ethics and professionalism, Market structures and competition, Declining in Purchasing power of currency, Poor standard of education, Poor standard of living, High cost of governance, Low rank in the world economies, Reduced level of foreign direct investment, Capital leakage, Increased business risks, Problem of Economic Regulation and Control, and so on.
This paper is concluded with some recommendations, to curb corruption and its effects on economy, which include Introduction of ethics (civic education) in school curriculum both at secondary and tertiary level; Constant holding of public enlightenment programmes on the principles of ethical standards of behaviour (market and community group); Capital punishments for culprits of corrupt practices in the public sectors;
Formulation and pursuit of efficient economic policies; Establishment of effective but less stringent business procedures and regulations; Promotion of invention and innovation by entrepreneurs; Regular conduct of public perception (referendum) on the proposed government policy.
INTRODUCTIONThe word ‘corruption’ and its dimensions have been enormously discussed and written on among the Nigerian academics, administrators and public speakers. The discussion still continues. However, this piece seeks to refresh, and perhaps enlightens the audience, of their awareness of the effects of the epidemic on our nation economy. It is no more a doubt that corruption has crippled our nation (Nigeria) economy such that virtually all sectors of nation’s economy have had its share of its effects. The impact of corruption on Nigerian economy is not only being felt within the geographical boundary but also affecting our position in the international community.
OBJECTIVE OF STUDYThe paper is aimed at achieving the following short term and long term objectives:
At the end of this presentation, members/ audience should be able to
understand the historical development of corruption in Nigeria
know the types of corruption and their dimension
appreciate financial and economic corruption as a special type of corruption tarrying the progress of Nigerian Economy
know the effects of corruption on Nigerian economy
understand how to curb the effects of corruption on Nigerian economy
The long term objectives are:
Members/audience should be able to educate of the public on financial and economic corruption
Members/ audience should be able advise public on how to curb the spread of the menace
To proffer possible ways out and suggestions to government on how to curb corruption in Nigeria
DEFINITION OF TERMSEffect, Corruption and Economy.
Effect: This can be defined as the impact, results or consequence of an event or action.
Corruption: Although corruption has been defined in various ways, which I do not intend to bother you with these definitions. However, from my point of view, corruption can be defined as any act that contradicts ethical and professional standards with a view to gaining undue or premature advantage or commendation(Babayanju, 2014)
Economy: It is the aggregate of commercial and professional activities and sectors in which people of a particular region engaged.
HISTORY / DEVELOPMENT OF CORRUPTION IN NIGERIA
It is an incontrovertible fact that corruption has been the bane of Nigeria’s development (Ogbeibi, 2012). However, according to S.O.Osoba (1996), corruption was not invented by, nor it is peculiar to Nigerian. On the contrary it is a global phenomenon with deep historical roots, although it manifests itself with significant
similarities and differences in different societies, depending on the peculiar systems of power distribution and the legal and moral norms operating therein. Corruption in Nigeria is a kind social virus which is hybrid of traits of fraudulent anti-social behaviour derived from British colonial rule and those derived from, and nurtured in the indigenous Nigerian context. Corruption in Nigeria can be traced to post-colonial era, although colonial system of governments paved way for its development. According to Michael M. Ogbeidi (2012), the political leadership (civilian and military) of the country since independence is responsible for entrenching corruption in Nigeria and, by extension, had impeded meaningful socio-economic development.
The First Republic under the leadership of Sir Abubakar Tafawa Balewa, the Prime Minister, and Nnamdi Azikwe, the President, was marked by widespread corruption. Government officials looted public funds with impunity. Federal Representative and Ministers flaunted their wealth with reckless abandon. This led to coup d’état of January 15, 1966. Ogbeidi (2012) quoting Okonkwo (2007), the General Aguiyi Thomas Ironsi military government that replaced the sacked civilian regime instituted a series of commissions of inquiry to investigate the activities of some government parastatals and to probe the widespread corruption that characterised the public service sector of the deposed regime(Okonkwo, 2007) In the same vein, General Yakubu Gowon administration as Miltary head of state who succeeded Ironsi in another coup of July, 1966 ruled the country at a time Nigeria experienced an unprecedented wealth from the oil boom of the 1970s.
Apart from the mismanagement of the economy, the Gowon regime was enmeshed in deep-seated corruption.(Ogbeidi, 2012). By 1974, reports of unaccountable wealth of Gowon’s military governors and other public office holders had become the crux of discussion in the various Nigerian dailies. Thus, in July 1975, the Gowon administration was toppled by General Muritala Mohammed through a coup d’état. The coup of 1975, among other things, was an attempt to end corruption in the public service (Ogbeibi 2012). Various commission of enquiries and investigation panels were set up and public official fund guilty were sanctioned: including dismissal from public service and confiscation of assets. The Second Republic, under President Shehu Shagari, 1979-1983, witnessed a resurgence of corruption. The Shagari administration was marked by spectacular government corruption, as the President did nothing to stop the looting of public funds by elected officials. General Buhari’s regime ,from 1983, promised to bring corrupt officials and their agents to book. Consequently, state governors and commissioners were arrested and brought before tribunals of inquiry. The new Buhari regime, which scarcely showed respect for human rights in its bid to entrench discipline and sanity in public life, was toppled by the General Ibrahim Babangida in a bloodless in- house coup on 27 th August 1985. The next thirteen years saw no serious attempt to stop corruption. If anything, corruption reached an alarming rate and became institutionalized during Babangida’s regime.
Leaders found guilty by tribunals under the Murtala Mohammed and Mohammadu Buhari regimes found their way back to public life and recovered their seized properties. According to Maduagwu, “Not only did the regime encourage corruption by pardoning corrupt officials convicted by his predecessors and returning their seized properties, the regime officially sanctioned corruption in the country and made it difficult to apply the only potent measures, long prison terms and seizure of ill-gotten wealth, for fighting corruption in Nigeria in the future” (Maduagwu quoted in Gboyega, 1996: 5, in Ogbeibi, 2012). Under General Abacha, corrupt practices became blatant and systematic. General Abacha and his family alongside his associates looted Nigeria's coffers with reckless abandon (Ogbeibi 2012) The Fourth Republic commenced with the election of General Olusegun Obasanjo as the President of Nigeria in 1999. However, the magnitude of corruption during the era of the various civilian and military regimes cannot always be determined with precision because the trend, ways and means of illegal self-enrichment were not similar. Again, the military often come to power accusing the ousted military/civilian regime of corruption and incompetence. The end result was that Nigeria became a chessboard in the hands of the military class with various military individuals, at different times, attempting to seize power primarily to enrich themselves. Consequently, being aware of the decades of systematic corruption perpetrated by the successive political leadership of Nigeria and the devastating effects it has had on the country in all ramifications of national life, the Obasanjo-led civilian government strengthened existing anti-corruption laws and established two important anti-corruption institutions – the Independent Corrupt Practices Commission (ICPC) and the Economic and Financial Crimes Commission (EFCC) in 2000 and 2003 respectively– to tackle the phenomenon of corruption in public and private life squarely (Ogbeibi, 2012). The question now is ‘has there been any meaningful progress towards fighting and curbing corruption in Nigeria?’ The answer to this question is not farfetched, as graduates and adult citizens, we are all aware of the reports of these anti-corruption agencies and results of various measures being put in place by various arms of government from 1999 to date. Unlike Obasanjo regime, Yar’adua / Goodluck regime, 2007 to date, has not made any notable effort in fighting corruption neither do corrupt officials properly being sanctioned. In order to take your time much longer, I will stop here on the history of corruption in Nigeria.
TYPES OF CORRUPTIONThe effect of corruption has many dimensions related to political, economic, social, moral and environmental effects. All these create different types of corruption.
CAUSES OF CORRUPTIONAs put by Brima Karl Samura, developing economies are predominantly buffeted with barrages of corrupt practices that have deep anchorage in the socio-political and cultural psyche and existence in such nations. This is particularly so in Sub Saharan Africa where majority of the populations especially in the rural areas suffer untold hardship as a result of what can be termed as organised or systematised corruption. This is true of Nigeria. The causes of corruption are numerous and the situation is often similar in many ways among developing countries to which Nigeria belongs. Some of these general causes of corruption as relates to Nigeria are discussed below.
Patronage ties between political elitesPatronage ties between political elites and those they represent often place heavy informal obligations and demands on the former. Typically, such elected representatives are not only overwhelmed with financial pressure from their family, but also from kin, clan, hometown and tribal or ethnic constituents. Such obligations are almost always fulfilled through corrupt means. Thus the participants in corruption are many besides the politician or elite who actually engages in the act. Because of the absence of state welfare institutions in Nigeria, political constituents expect politicians representing them to cater for their quotidian and small scale infrastructural needs.
Psychological factorsAnother cause of corruption is psychological. There are numerous psychological factors that can help to explain some types of corruption. Internally, some people are “naturally evil” and will commit criminal acts, including corrupt ones in any type of system. Pressure and peer comparison can contribute greatly to acts of corruption especially so where the socially revered are the corrupt ones. This presupposes that in an environment where an individual see others around him/her benefiting from corruption, they may well choose to indulge too. Nepotism, that is, helping others because they are closely related to you can also be related in psychological term. The cliché “blood is thicker than water” is usually the excuse for nepotism.
MonopolyMoreover, monopoly of power can also be a cause of corruption in Nigeria. This could often apply or exist for the simple reason that people in power are the ones mainly charged with the responsibility of governing. Thus, out of discretion they can expend such powers to perform acts of corruption as maybe dictated by their circumstances.
Weak judicial systemFurthermore, weak judicial system is also a serious cause of corruption. Most often, judicial systems are weak as a result of poor conditions of service. In such situations, it is the poor people that suffer the brunt of injustices as the rich always stand a better chance of getting justice over the poor. This is usually the case in Nigeria. Related to this is the absence of clear-cut separation of powers between the judiciary and executive arms often results in the latter exercising undue influence over the former. Such undue influence is most pervasive in situations where there is no guarantee of security of tenure for the judicial officers. Example is the case of former president of Court of Appeal, Justice Muritala Akanbi, who was suspended by Mr. President without proper judiciary process.
Other factors relating to economic corruption are:
Unemployment: Another serious factor causing corruption is unemployment. As a popular saying “idle hand is a devil’s workshop”. When people are not gainfully employed, they tend to engage in various acts of corruption in order to meet their needs.
Poverty: Most people are lured into corruption because they lack basic needs. In Nigeria many people who are poor do easily trade their integrity for financial rewards and, this marks the beginning of their journey to corruption.
Lack of Ethical Standards: Ethics is concerned with right and wrong and how conduct should be judged to be good or bad. It is about how we should live our lives and, in particular, how we should behave towards other people. Standards are acceptable or expected minimum level of performance. Ethical standards therefore are levels of conducts and behaviours that are socially and culturally accepted to be good or right. Nigerians no longer feel concerned about the consequences (good or bad) of their actions or inactions.
Professional Incompetence: Though not all, most actors of corruption are people with low competence in their profession. Since they are not well trained or highly qualified, they do not follow the standards or the codes of conduct as laid down in their profession or organisations. Their inability to adhere to the standards, voluntarily or involuntarily usually results in corrupt practices.
EFFECTS OF CORRUPTION ON NIGERIAN ECONOMYThe economic effects of corruption can be categorized as minor and major. However, both in one way or the other have serious impact on the individual community and country.
Depletion of National WealthNigeria has lost to corruption most of her rich natural and human resources such that no effort is being made to ensure their sustenance and replenishment once extracted. Nigeria being a major player in oil and gas industry is doing nothing to ensure the sustenance due to corruption. Brain drain has been a major setback to economic development in Nigeria. Most of the national experts in various fields have left the country in search of greener pastures overseas as the nation’s economy is not friendly.
MisappropriationEvery day we hear about misappropriation of funds. Corruption makes possible the diversion of funds from the intended purpose to other uses in order to syphon funds to personal purse. It has also enabled conversion of public wealth to private and personal property by the people in the position of authority.
InflationIn Nigeria, most government approval and documentations required for business operation are being carried out in corrupt manner such that the entrepreneurs have to bribe (pay high price) to get them. This increase cost of production and in turn, they are passed to the consumers in form of high prices of goods and services.
Imbalanced economic developmentIn a nation engulfed in corruption, economic developments are not evenly distributed among various sectors of the economy. Some sectors flourish at the expense of others simply because they are of importance to the elms of affairs. Those sectors where masses benefit are left unattended to.
Market structures and competitionOne of the major economic effects of corruption is hindrance to the development of fair in market structures and unhealthy competition there by deterring competition.
Declining in Purchasing power of currencyDue to corruption, Nigerian Naira has really lost its value relative to other world currency. Currently, Naira is about N165 to $1 as against what it used to be during the early period on independence, when a Dollar traded for less than a Naira. This has made importation more costly.
Poor standard of educationEducation, they say, is the bedrock of development. Corruption in education sector has culminated in falling quality of graduates, who are supposed to pilot the engine of economic development in the country.
Poor standard of livingIndeed, it is a paradox that Nigeria, the world's eighth largest exporter of crude oil, a country endowed with many resources, still has more than 70 percent of its population living below the poverty line as a result of corruption and economic mismanagement (Ogbeibi 2012). High cost of goods and services, occasioned by corruption, makes it impossible for masses to afford basic economic needs of life. Most Nigerians live below poverty level of $1 per day.
High cost of governanceTo fight corruption, government is compelled to formulate multiple economic-political reform policies, which often lead to establishment of multiple agencies. The operation of these agencies increase government expenditures.
Reduced level of foreign direct investmentCorruption has discouraged foreign investment in the Nigerian economy. Many foreign companies left Nigeria because of lack of infrastructural facilities caused by corruption.
Capital leakageEmbezzled funds are being transferred to foreign countries. Gains obtained through corruption are unlikely to be reinvested within the country but transferred to foreign bank accounts. These transfers represent a capital leakage from the domestic economy. This reduced available capital for economic development in the country. According to Samura, in Nigeria, for example, more than $400 billion was stolen from the treasury by Nigeria's leaders between 1960 and 1999. University of Massachusetts researchers estimated that from 1970 to 1996, capital flight from 30 sub-Saharan countries totaled $187bn, exceeding those nations' external debts
Problem of Economic Regulations and ControlCorruption reduces opportunities for the government to control the economy and limits potential spending –a strong informal economy can have a crippling effect. A Mauro notes: “Corruption may also bring about loss of tax revenue when it takes the form of tax evasion. Corruption reduces the transparency of economic transactions by both public and private sector firms while undercutting the government’s ability to raise capital. Corruption can create fiscal weakness which in order to compensate for decreasing tax revenue, may force an increase in rates of taxation on a diminishing number of taxpayers thus reducing its ability to provide essential public goods and services.
Other effects of corruption on our nation economy are increased business risks; Weakling work ethics and professionalism; low position in the world economies ranking; inefficiency in allocation of benefit and so on.
SEEMINGLY POSITIVE IMPACTS OF CORRUPTION ON THE ECONOMIC DEVELOPMENTAccording Leff, N (2002), corruption has some positive impacts on the economic development. These are:
Influencing GovernmentLeff argues that corruption is an extralegal institution used by interest groups to gain influence over the actions of the bureaucracy to an extent that would not otherwise be possible. This he suggests can be beneficial to development if business groups that would otherwise be at a disadvantage in articulating their interests to the government get an opportunity to do so. If these groups are more likely to promote growth than the government, an enhanced position in policy making could, he suggests, be beneficial to development. He suggests bribery can activate the bureaucracy to get things done which otherwise would not take place
PredictabilityInvestments in developing countries can be particularly risky due to the unpredictability of the political and economic conditions. The extensive role of the government in the economy means arbitrary decision making which can be problematic for business for which maintaining consistency and judging long term economic trends is important. In this situation, in securing predictability for their investment, Leff suggests, corruption creates a more attractive environment for investment. By bribing officials to maintain certain political conditions, the success of an otherwise risky investment can be secured as there is a much more assured return on investment.
InnovationIn an undeveloped society, potential entrepreneurs may be discouraged from investing and innovating due to the barriers of entry created by existing products and processes. In this situation, Leff suggests, “…graft may enable an economic innovator to introduce his innovations before he has had time to establish himself politically.” Leff suggests that because of bureaucrats’ existing economic interests, innovators may be regarded with indifference or even hostility. In this environment, bribery could provide innovators an opportunity to obtain elusive government licenses and permits. Furthermore, ‘facilitation payments’ may allow businesses to bypass unnecessarily cumbersome delays.
Competition and efficiencyLeff contends that introducing competition into an otherwise uncompetitive economy can be beneficial to development; “…corruption brings an element of competition with its attendant pressure for efficiency to an underdeveloped economy.” By allocating contracts to the highest bidder, it ensures only those able to pay the highest bribes, and thus the most efficient (because they have to muster capital required) survive.
SUMMARY, CONCLUSION AND RECOMMENDATION
Summary & ConclusionThe corruption and its attendant consequences had eroded all sectors of economy: individual firms and government. The history and development of corruption dated back to the inception of post-colonial period and characterised past military and civilian government.
Notwithstanding some seemingly economic development impacts of corruption, as put forward by some writers, it has resulted in depletion of national wealth; misappropriation; conversion of public wealth to private and personal property; inflation; imbalanced economic development; weakling work ethics and professionalism; hindrance of the development of fair in market structures and unhealthy competition there by deterring competition; declining in purchasing power of currency; poor standard of education; poor standard of living; bank failures ; sick capital market; disobedience / moral decadence; high cost of governance: multiple economic-political reform policies; agency problem; and low rank in the world economies. Corruption is therefore a deadly and contagious phenomenon to our nation’s economy.
RecommendationOwing to myriad of negative effects on our nation economy, the following measures are recommended (to government):
Introduction of ethics (civic education) in school curriculum both at secondary and tertiary level
Constant public enlightenment programmes on the principles of ethical standards of behaviour (market and community group)
Capital punishments for culprits of corrupt practices in the public sectors
Formulation and pursuit of efficient economic policies
Establishment of effective but less stringent business procedures and regulations
Promotion of invention and innovation by entrepreneurs
Regular conduct of public perception (referendum) on the proposed government policy.
Other recommended measures, on the part of individuals, firms and community at large are:
Self-discipline and resistant to corruption
Enhanced moral and home training (by parent to children)
Promotion of organizational and professional ethics.
References1. Babayanju Abdul Ganiyu (2014): Corruption between Ethics and Professionalism: Awareness for youth corps members. Unpublished.
2. Brima Karl Samura(2008): The Negative Effects Of Corruption On Developing Nations
3. Leff, N (2002). “Economic Development Through Bureaucratic Corruption”, in Political Corruption: Concepts and Contexts. Eds. Heidenheimer A. & Johnson, M. (Transaction Publishers, 2002)
4. Michael M. Ogbeidi (2012): Political Leadership and Corruption in Nigeria Since 1960: A Socio-economic Analysis. Journal of Nigeria Studies Volume 1, Number 2, Fall 2012.
5. Segun O. Osoba (1996): Corruption in Nigeria: Historical Perspectives. Review of African Political Economy: ROAPE Publication Ltd.
6. WOLRDGIST (December, 2013): Corruption in Nigeria: Effects on The Nigerian Economy.
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