How corruption impedes Nigeria's economic recovery

According to the Transparency International’s corruption perception index, Nigeria currently occupies the position of the 2nd most corrupt country in West Africa, with Guinea-Bissau being the only country more corrupt than Nigeria in the region and the 149th out of the 180 corrupt countries globally with a score of 25 out of 100 points.

The Transparency International’s corruption perception index scored 180 countries on a scale of 0-100, where 0 means a country is perceived to be very corrupt and 100 means it’s perceived to be very clean. More than 120 or two-thirds (2/3) of those countries scored less than 50 and the average score was 43 definitely a failing grade globally.

Corruption is not just a moral issue, it’s also an economic issue and it’s costing the global economy and its individuals. It is difficult to place an exact number on the global cost of corruption but by most estimates, it’s in the trillions and that’s a lot more than the entire GDP of most countries. Countries regarded as less corrupt like New Zealand, Denmark and Singapore tend to have smaller populations. Most of the Countries on the list have less than 10 million people hence, size doesn’t guarantee a lack of corruption; some at the bottom of the list are small as well but they tend to be war torn countries like Somalia, Syria and South Sudan. However, most of the world’s most populous countries are pretty far down the list like Nigeria, Indonesia, Brazil, Russia etc.

‘Anything for the boys’ and ‘Happy weekend Sir’ are the popular local slangs for bribery in Nigeria where weekend hangouts are deeply entrenched in society. Last year, a survey estimated that 1 in 4 people in Nigeria paid bribes to access public services like getting help from the police or obtaining NIN/ identity cards. Police officers were the most likely to demand for bribes and poorer and younger people were more likely to pay it.

It may seem trivial, but when you analyze it on a bigger scale, the IMF estimates that the annual cost of bribery is between $1.5-$2 trillion dollars about 2% of global GDP and that is only one type of corruption. Other types of corruption include money laundering, embezzlement and fraud.

The Panama papers being one of the biggest document leaks in history encompassed 11.5 million secret files and revealed how much wealth has been hitting in off-shore accounts and tax havens. To be clear, offshore accounts are legal but papers brought up fundamental questions about tax havens.

The panama papers revealed links to 140 politicians and public officials of which 14 were heads of states. As a result of the revelations then, the prime ministers of Pakistan and Iceland were forced to resign; the world’s second highest paid athlete ‘Lionel Messi’ was named and charged for tax evasion while a suspected billion dollar money laundering ring was linked to close associates of Russian president Vladimir Putin. The Panama papers wiped out $174 billion dollars off the market capitalization of nearly 400 companies making it the largest financial loss following a corporate scandal in history.

In this current recession, economists are of the opinion that inflation and insecurity might not be the only threat to Nigeria’s economic recovery and its subsequent growth. They opine that corruption also hurts a country’s economic growth. The Question thus becomes HOW?

Corruption results in fewer investors wanting to put their money in the country. A study showed that a unit increase in corruption levels can reduce Foreign Direct Investment (FDI) per capita by 11%. It could also discourage people from paying taxes, when they perceive that taxes are simply going into corrupt pockets; that means less money for the government which then affects the government’s ability to build infrastructure and public services crucial for economic recovery/growth. In Nigeria, corruption can inflate the cost of a public project by 13%; that means lower quality projects despite higher spending (examples could be drawn from the events of the pandemic).

The IMF and World Bank have made fighting corruption a key priority, for instance the IMF unveiled a policy to hold member countries to the same standards making it a condition for IMF loans as well as ensuring that the various governments made anti-corruption pledges after setting up the anti-corruption court.