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The network of fiscal-related corruption in Nigeria and how the syndicate operates

“Fiscal-related” in the title, means corruption that is directly linked to public finance, i.e., government revenues, expenditure & public debt. The terms “fiscal” is wider than that of “tax” as it includes royalties, which are not taxes but still contribute to the state’s overall fiscal take. This type of corruption would not exist in the absence of any government to collect revenue and make expenditures.

Our focus is therefore on those who have access to the public till: directly, e.g. politicians and bureaucrats; and, indirectly, their associates – lawyers, bankers and businessmen. As per the above, we identify inter alia five professional groups contributing to the flourishing of corruption in Nigeria. Taking these in turn:

First on the list is politicians (not all politicians, only those who are corrupt). These are the principal agents of corruption. Their motivation for seeking political office is not with the intention to help the governed but to have easy access to and steal from public till. The abundance of oil rents (i.e. supernormal levels of profit that are over and above “normal” levels of profit obtainable in other industries, whereby the “rent” is this difference which is driven not by the industrious entrepreneurship of the company/ individual in question but rather by that firm’s or individual’s access to the valuable petroleum in the first place) has become the focus for greed that determines the highly competitive political contests in the country.

Why are they so desperate to amass wealth? There are two likely reasons: to reinforce their hold on power; and the fear of what tomorrow brings. It is said, if there is uncertainty about future income, today’s consumption likely to be depressed. How is the stealing possible? Please follow the story (or the discussions).

Also, bureaucrats (not all bureaucrats, only the corrupt ones). This refers to civil servants working in finance-related agencies (or ministries) of government. e.g. the Federal Inland Revenue Service, the Nigerian National Petroleum Corporation, the Federal Ministry of Finance, the Central Bank of Nigeria, Nigerian Custom Service, etc. Because they understand the workings of the system and the civil service terrain, they are able to collude with and assist politicians in stealing public funds. They also get their share of slush funds as they help draw up plans for false or inflated contracts through capital expenditures and ghost workers through recurrent expenditures.

Meanwhile, commercial bankers are not excluded (not all of them, only the fraudulent ones). After the above stated professional groups, the bankers help the politicians launder the stolen funds, transfer some abroad, breaching protocols (applicable to commercial bankers) and burying the traces. They also arrive at secret understandings, conspiring with top bureaucrats and other politicians to delay the payment of salaries/allowances of public servants. The gain to them is the interest generated (by investing in short term securities) between the point when workers are due their entitlements and when they are actually paid.

Of course, businessmen/contractors (not all of them, only the fraudulent ones). There is a strong symbiotic relationship between politicians and businessmen. One direction of the relationship is that the businessmen fund the campaigns of the politicians and if they win, they (the politicians) uses his office to compensate the businessmen through inflated contracts. The other direction of the relationship is that businessmen may not have contributed to the victory of the politicians but they have business ideas. These ideas are then funded by politicians. Businessmen sometimes fronts and runs the business on behalf of the politician without disclosing the identity of the true owner of the business.

They also transform the proceeds of crime or corruption by politicians into ostensibly legitimate money or other assets through inflation of cost of government contracts/procurement. I’m in strong concord with what the former Chairman of EFCC, Nuhu Ribadu once said: “…many Nigerian businesses are being finance with dirty money.” In my opinion, a large percentage of businesses in the country were and still are being financed by such monies.

Dismissing the myth that “corruption proceeds can fuel economic growth.” It is often argued that stolen funds can be used finance businesses and thus, create more jobs and generate growth if invested back into the source (or originating) country. But this is a depiction, in terms of social equity, of potential deadweight losses, that such a view propagates. That is, the diversion of resources away from the provision of public goods (e.g. roads) main for common good, to the provision of private goods.

Here is one example, a quote from the former Chairman of the House of Representatives Committee on Power in Nigeria, Hon Godwin Ndudi Elumelu, “there is no reason, after spending $13.2 billion, as it were, we are still talking about 3,500 megawatts. In Brazil, they spent only $12 billion and they have 12,000 megawatts of electricity; so why can’t we have the same?”

We need infrastructure on ground to attract foreign direct investments, but corruption diverting away the resources main for this.

Corruption seems to channel substantial amount public resources to senior bureaucrats and politicians who have direct access to (and deliberately refused to retrace their “filthy fingers”) from the public till.

However, one believes there is hope for Nigerians: but for a few in the short-run and perhaps for many in the long run. But if there is no sweeping intervention between the short-run and the long-run, then, as Keynes will say, “…in the long-run, we are all dead”

We shouldn’t also forget the lawyers (not all of them, only the twisters). “When a politician steals N20 billion (£68.62 million), he keeps N5 billion (£17.15 million) for litigation. He hires a Senior Advocate of Nigeria (SAN)… Judges then accuse us of not conducting proper investigation in order to Compromise,” Ibrahim Magu, the head of EFCC.

The lawyers provide incentives for politicians to be more corrupt. In that, in the process of litigation, they find ways around the constitution to exonerate/extricate the accused politician from the grip of the law and justice. They often do this because of the huge amount which they get from such corrupt clients.

Some thoughts on addressing corruption

Is it possible for this network to be broken, smashed and killed? Some have suggested capital punishment. But I see this as a despondent approach. Why? When a corrupt person is found guilty and killed, there is always another to take his place. Former President Obama once said, “you cannot bring an end to terrorism because you cannot erase evil from the heart of men” (I add, only God can do that). What then is the way out?

Temptation is the true revealer of what’s in somebody’s heart. Where there is no opportunity for graft, people appear to be “fine”. Some countries (say country A) is more corrupt than another (say country B) but the practice of it is higher in country B than in country A. The likely difference is the quality of institutions, strength of enforcement and the use of technology.

In my view, technology limits the practice of corruption, keeping it back to its source – the heart of man. There are two drivers of corruption: greed and want. Understanding them may help in addressing the problem.

​An example on how to fight ghost-worker related corruption and delay of payments using technology.

Since sporadic payments of public workers’ pay in Nigeria is a common situation at both the at state and local government levels than at federal governments. The FG should pay the state and LG staff directly from the federation account – deducting from the federal allocations going to each of states. After this, whatever is left of the total allocation, be sent to the states as net subventions.

Some people steal because of lack; they want to meet some financial obligation, e.g. to defray the costs of accommodation, school fees, and food, their debts, some other basic needs, etc. While this is not a plausible justification for stealing, it can be countervailed with a pay rise or other form of emolument

How is this to be done? First and foremost, using biometric, the FG to collect, into a federally-centralised database, finger-prints and other essential details of all (federal, state and local) government staff. Also, get an ATM-like device, maybe through a MoU with one of the technologically advanced countries. The device to have a built-in finger-print feature that links (or synchronises) with the central database that is holding the staff information of every public servant in the country. Also, at the end of every month, when salaries are due, the staff to use his/her finger prints to withdraw the pay, transfer part or the entire amount to his/her existing bank account using the machine.

So long as the states rely on the FG for subventions, they are not autonomous.

Let us start with want-driven corruption. Some people steal because of lack; they want to meet some financial obligation, e.g. to defray the costs of accommodation, school fees, and food, their debts, some other basic needs, etc. While this is not a plausible justification for stealing, it can be countervailed (or mitigated) with a pay rise or other form of emolument.

Greed-driven corruption. No sum of money can quench it, as it is like cocaine. When somebody takes the first shot and is hooked, he wants to go for more and more of it. The marginal utility never falls at any point of additional consumption. The lowest it can go is to stay constant and never below its previous value. The best way therefore to heal an addict, is to isolate him/her from drugs. Similarly, it is necessary to isolate the corrupt-ridden public servant from functions relating to public finance. There is also the need to build strong anti-corruption institutions and embark on reforms that reduce or eliminate opportunities for corruption.

 

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