THE IMPACT OF CORRUPTION ON THE NIGERIA ECONOMY(1999-2015)

THE IMPACT OF CORRUPTION ON THE NIGERIA ECONOMY(1999-2015)

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CHAPTER ONE

                                                            INTRODUCTION

BACKGROUND OF STUDY

Corruption is a global issue which is an endemic to government all over the world. The World Bank website cites corruption as the single most important obstacle to development. It is a subversive force that can topple the most entrenched regimes, it corrodes currencies, markets and investments.

The study of the causes and consequences of corruption is not a recent phenomenon it has a long history in economics, dating back at least to the seminal contributions of the rent seeking literature by Krueger (1974), Rose-Ackerman (1978) and Bhagwati (1982). In fact corrupt practices are not an issue that just begins today; but the history is as old as the world (Lipset and Lenz, 2000).

According to Tanzi (1998) corruption is the intentional noncompliance with arm’s length relationship aimed at deriving some advantage from this behavior for oneself or for related individuals. However, not all acts of corruption result in the payment of bribes. For example, a public employee who claims to be sick but goes on vacation is abusing his public position for personal use. Thus, he is engaging in an act of corruption even though no bribe is paid. The president of a country who has an airport built in his small hometown is also engaging in an act of corruption that does not involve the payment of a bribe.

Corruption has no uniform definition. This is so because what is regarded as corruption depends on the actors, the profiteers, initiators, how and where it takes place. It also depends on the existing laws and regulations guiding certain actions. Some countries define corruption in the broadest form while others legislated on the narrow definition of the term. Irrespective of how a nation perceives the definition of corruption in its economy, corruption is a deterrent to the economic growth of a nation hence a stumbling block to its progress.

Though corruption may not be easy to define, it is generally not difficult to recognise when observed because acts of corruption do not typically take place in broad daylight (Tanzi,1998).

Evolution of corruption

The genesis of corruption in Nigeria might not really be associated with a particular period. Nonetheless, Benjamin (2007) asserted that corruption in Nigeria can be traced back to the colonial era when Nigerians were bribed with different foreign goods in exchange for local products in exchange for slaves. Aside this, various regimes have also been associated with certain corrupt practice. The system has been such that corruption is used to check corruption by corrupting the system all the more. The illegitimate taking over of government by the various military regimes via coup d’état were often justified by pervasive corruption.This tends to use corruptly armed measures to check and making the economy worse off; abolition of the constitution by replacing it with decrees, abuse of fundamental human rights among others. Sowunmi (2010) opined that the history of corruption in Nigeria is strongly rooted in the over 29 years of the military rule, out of 46 years of her statehood since 1960. Ribadu (2006) claimed that successive military regimes subdued the rule of law, facilitated the wanton looting of the public treasury, decapitated public institutions and free speech and instituted a secret and opaque culture in the running of government business. Corruption became the dominant guiding principle for running affairs of state. The period witnessed a total reversal and destruction ofevery good thing in the country and indeed, the military took corruption to its highest levels ever.

Corruption in Nigeria

There are different vocabularies used to describe corruption in Nigeria. Some of these are bribery, extortion (money and other resources extracted by the use of coercion, violence or threats), embezzlement (theft of public resources by public officials). It is when a state official steals from the public institution in which he/she is employed), betrayal of trust, unfair advantages, financial malpractices, “egunje”, dash, gratification, brown envelopes, tips, emoluments, greasing, softening the ground, inducements, sub-payments, side payments, irregular payments, payment under the table, undocumented extra payments, facilitation payments, mobilisation fees, “routine governmental action,” revised estimates, padded contracts, over(under)-invoicing, cash commissions, kickbacks, payoffs, covert exchanges, shady deals, cover-ups, collusion, “10% rule” (bribe surcharge), “50% rule” (sharing bribe within the hierarchy), “let’s keep our secret secret,” "highly classified" transactions, customary gift-giving, tribute culture, nepotism(a special form of favoritism in which an office holder prefers his/her kinfolk and family members), etc.

Corruption manifests itself in Nigeria inform of abuse of positions and privileges, low levels of transparency and accountability, inflation of contracts, bribery/kickbacks, misappropriation or diversion of funds, under and over-invoicing, false declarations, advance fee fraud and other deceptive schemes known as “419”, collection of illegal tolls, commodity hoarding, illicit smuggling of drugs and arm, human trafficking, child labour, illegal oil bunkering, illegal mining, tax evasion, foreign exchange malpractices including counterfeiting of currency, theft of intellectual property and piracy, open market abuse, dumping of toxic wastes, and prohibited goods” just to mention few.

Nigeria remains mired in corruption, crime, poverty, and violence despite the promulgation of several laws like in other countries as the principal mechanism for curbing corruption. The legal instruments used to fight corruption in Nigeria include the Criminal Code, Code of Conduct Bureau, the Recovery of Public Property Act of 1984, the Economic Financial Crime Commissions (EFCC) and the Independent Corrupt Practices and other related Crime Commission (ICPC).

Two major events that have led to a litany of corrupt practices in Nigeria are the rise to public administration and discovery of oil and natural gas. It is interesting to note that pervasive corruption has been blamed on colonialism. Throughout the colonial period, most Nigerians were stuck in ignorance and poverty. A view commonly held during the colonial days was that the colonist’s property (cars, houses, farms etc.) is not our property. Thus vandalism and looting of public property was not seen as a crime against society. This view is what has degenerated into the more recent disregard for public property and lack of public trust and concern for public goods as a collective national property.

During the first and second republics, government officials were in the habit of collecting 10 per cent from contract funds. The era witnessed unprecedented level of venality by high- ranking politicians. Corrupt practices were also manifested in the manipulation of the electoral process, politicization of the judiciary and resort to false accusation charges to intimidate political opponents of the government. Thus, pervading culture of corruption was one of the reasons given by the armed forces when they sacked elected governments in January 1966 and December 1983. However, apart from General Murtala Mohammed and Mohammudu Buhari, other military rulers engaged in large scale corruption with freedom from punishment. Successive military regimes mismanaged the opportunities created by the relatively enormous increases in huge revenue from oil, obtained through compulsory public acquisition of majority shares in the oil-producing companies, as well as through taxation.

Corruption in Nigeria became legitimised especially during Babaginda and Abacha regimes (1985-1998). During these regimes, there were high but wasteful spending and nothing to show in terms of physical developments. During this period, the culture of corruption through which Nigerians have come to know as a settlement syndrome became part of the country’s political culture.

Abacha’s regime witnessed the height of all corruption. UNIDC (United Nations Industrial Development) maintained that about $107 billion were kept in private accounts in Europe and the United States. He completely emptied the national treasury, about ₦400 million was purported to have been looted by him and his military goons.

The civilian administration of former president Olusegun Obasanjo was received with much expectation following the bitter experience of the previous administration before it. The administration on its inception promised to fight corruption to a significant extent, to this end even though the move against corruption started late in the life of the administration; it however yielded results that supersedes those of previous administrations before it (“Standing Up Against Corruption,” 2006). In the years that followed among others, was the recovery and repatriation of $240 million and $500 million from the Abacha’s loot in foreign bank accounts, N500 billion was recovered by the EFCC from corrupt government officials, the removal of two senate presidents, dismissal and prosecution of four cabinet ministers, prosecution and imprisonment of a former inspector-general of police and impeachment and prosecution of two state governors. Though Obasanjo promised that his administration would not be business (corruption) as usual but the attempts by Obasanjo himself to get an unconstitutional third term in office had eroded the anti-corruption gains of his government and the country returned to business at usual.

(Late) President Yar’adua intended to make transparency and accountability the cornerstone of his administration with a view to discouraging corruption. He showed this in a singular act, by being the first Nigerian Leader in the country to publicly declare his assets, by so doing, he equally raised the stakes for all occupants in the public office.

Unfortunately, in 2008 during Yar’adua’s tenure, Mallam Nuhu Ribadu the Economic and Financial Crimes Commission (EFCC) chairman was demoted from the rank of Assistant Inspector General (AIG) to Assistant Commissioner of Police. It was observed that Ribadu was being punished for his honest character and unprecedented arrest, arraignment and trial of some powerful big men for corruption.

President Goodluck Jonathan, the current president in a special interview with Jonathan Power, a Swedish journalist in February 2012, viewed Nigerians as among the highly religious-minded human beings on earth, and stated that it remained a marked contradiction to see the pervasive level of corruption that exists in the country. He also believes that corruption human ‘greed’ is the devil preventing Nigeria’s development instead of the widely-believed ‘corruption’ horror. When he was the governor of his native Bayelsa State, he once argued that corruption committed by lower people in Nigeria is deadlier to the health of the Nigerian state than the sleaze done by higher-ups.

Corruption is largely responsible for stunted economic growth of the country, and for the mass poverty that reigns in the land. The quality of public infrastructure and services has continued to be low as a result of corruption. It undermines democratic institutions, slows economic development and contributes to governmental instability. It attacks the foundation of democratic institutions by distorting electoral processes, perverting the rule of law and creating bureaucratic trap whose only reason for existing is the soliciting of bribes. Also, foreign direct investment is discouraged and small businesses within the country often find it impossible to overcome the "start-up costs" required because of corruption and thus have taken their monies to other countries in the sub region.

UNDP publication in 1999 listed Nigeria as one of the twenty poorest countries in the world. But as an oil-producing nation and indeed the 6th biggest producer of crude oil in the world with oil receipts of over $280 billion

STATEMENT OF PROBLEM

The international community has finally appreciated and come to terms with the reality of the “cancer of corruption” and its ubiquitous nature; hence, we are all in agreement that being a persistent feature of human existence worldwide, its solution lies in the collective action of key global institutions with organized international joint efforts against corruption. These efforts have produced a lot of anti-corruption measures including bi-lateral and multilateral agreements, enactment of national anti-corruption laws such as the Nigeria’s Economic and Financial Crimes Commission Act, 2004, the designing of international framework and strategies for the prevention of corruption and the making of an all important United Nations Convention Against Corruption which has now become the reference point for anti-corruption fight all over the world.

Nonetheless, the need to study corruption and anti-corruption has continued to generate passionate commentaries and academic interests. While it is obvious that this interest has made the subject matter better understood to an extent, the hundreds of information being incorporated into its study, research data and the diversity of some of the findings have sometimes established some levels of complications too. Apart from the fact that some have attempted to mischaracterize corruption as a tool for development under such labels as “grease the wheels” arguments or the “efficiency grease”, the question still persists, for instance, on how corruption should be situated, whether within the context of the “moralists,” “developmentalists,” or “functionalists” definitions.  More directly, should the definition be public-office centred, market-centred or public-interest centred?

Meanwhile, the definition of corruption becomes more complicated when viewed in terms of such classification as supportive corruption, transactional corruption, extortive corruption, defensive corruption, investive corruption, personal and institutional corruption, traditional and modern corruption, local, national or international corruption, or representational corruption, grand and petty corruption. Or simply put, should corruption be viewed as corruption and nothing more? Many questions continue to arise in our experience and engagement of corruption and corrupt practices.

To this extent and with a focus on the activities of the Economic and Financial Crimes Commission (EFCC) in Nigeria, this presentation engages two questions: What are the causes and consequences of corruption in Nigeria and how has EFCC responded to the scourge? To engage these questions, the rest of this paper is divided into four parts that involve the causes of corruption in Nigeria, its consequences, the role of the EFCC and a conclusion laced with a recommendation that focus on the need for a Special Anti-corruption Court.

OBJECTIVES OF STUDY

1.To determine the impact of corruption on economic growth and development

2.To determine the impact of corruption on foreign direct investment

3.To determine the causes of corruption in the Nigeria economy

4.To determine the solutions to corrupt practices in Nigeria

RESEARCH QUESTIONS

1. What is the impact of corruption on economic growth and development?

2. What is the  impact of corruption on foreign direct investment?

3.What are the  causes of corruption in the Nigeria economy?

4. What are  the solutions to corrupt practices in Nigeria?

RESEARCH HYPOTHESIS

H0; There is no significant relationship between corruption and economic developmemt

H1; There is a significant relation between corruption and economic development

SIGNIFICANCE OF STUDY

The study will enlighten the public on the dangerous effect of corruption to the Nigeria economy and possible way out. Since there is no much work done on this, it will contribute to existing knowledge.The study will also be useful to government of Nigeria on how to  curb the menance and restore hope to the Nigeria society.

SCOPE OF STUDY

This study aim ata evaluating the effect of corruption in an economy and using the Federal Republic of Nigeria as a case study. The need to study corruption and economic growth in Nigeria has continued to generate passionate commentaries and academic interest due to the level of corruption in the country and its effect on economic growth. In Nigeria corruption is one of the reasons for many unresolved problems that have critically hobbled and reduce development (Ayobolu, 2006). It also remains a long-term major political and economic growth challenge for Nigeria (Sachs, 2007). International centre for economic growth (1999) states that corruption is a canker worm that has eaten deep in the fabric of the nation which ranges from petty corruption to political or systematic corruption. Abiodem (2007) in World Bank studies put corruption at over $1 trillion per year accounting for up to 15% of the Gross Domestic Product of nation like Nigeria. Corruption is a canker worm that has reduced development in all sectors of the economy (EFCC, 2005). Corruption has been the primary reason behind the country difficulties in developing fast (ICPC, 2006). Ribadu, (2003) states that this is the reason why transparency  international has consisted rating of Nigeria as one of the top three most corrupt countries in the world.


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