How best to fight corruption in Nigeria

Most Nigerians agree that corruption is at the root of our national malaise. Many studies also show that corruption, indeed, has an adverse effect on economic growth and development and that “countries with high levels of corruption experience poor economic performance” However, history has not been very clear on this. Evidences from East Asia and China show that corruption can have a positive effect on economic activities. There, it serves mainly to grease the wheels of inefficient government bureaucratic machines thereby leading to more efficient outcomes.

For example, Transparency International, the global anti-corruption watchdog, in its 2004 ranking of corrupt countries and leaders ranked Indonesia and its leader – Suharto as first on the table. It was estimated he skimmed off $15-35 billion of the country’s resources. He was followed by Philippine’s Marcos ($5-10 billion), Zaire’s (DRC) Mobutu ($5 billion), and Nigeria’s Abacha ($2-5 billion).

However, despite the pervasive corruption under Suharto, he presided over a golden age which saw inflation lowered from 660 per cent in 1969 to 19 per cent in 1996, life expectancy increased from 47 years in 1966 to 67 years in 1997, and incomes quadruple to $ 1,000 per capita. Indonesia became a miracle economy in the late 1980s and 1990s with an almost uninterrupted seven per cent annual growth, graduating from a mere commodity producer to a big exporter of manufactures. Poverty, infant mortality and fertility plummeted under Suharto while literacy soared. His era ended in ruins during the Asian financial crisis, but that event upended regimes from Korea to Bangkok. His achievement remains impressive.

The Chinese economic miracle is also widely known. Post Mao’s China defied all previously known growth levels as its GDP grew more than 10 per cent consistently for over 30 years. By 2011, China had become the world’s No. 1 trader, surpassing the United States and also toppled Japan as the second largest economy in the world. The interesting aspect of China’s phenomenal growth however, is that corruption was also growing in tandem with the economy. Evidence exists on this score even in a reclusive society like China. The number of senior government officials charged with corruption rose sharply from a mere 190 in 1988 to 2,700 in 2009. The East Asian and Chinese reality firmly contradict the ‘orthodoxy’ that corruption depresses growth rate and slows development.

By contrast, Mobutu left Zaire (now Congo DR) poorer and ravaged. He destroyed most institutions and businesses and more or less converted the state’s resources for personal use. The same was true of Abacha in Nigeria. The record of people like Marcos was mixed: he did rebuild Philippine’s collapsing economy, but then corruption and maladministration seriously eroded the initial gains.

Why, then, does corruption co-exist with both good and bad economic performance? In a survey conducted some years ago, it was discovered that the main problem with corruption was that it increased risks and uncertainties. These risks declined dramatically if corruption produced reliable outcomes (as in Indonesia). If all players had to pay 10 per cent and are sure of getting their licences, entrepreneurs could treat this as just one more tax, factor it into their calculations of returns, and so invest with confidence. In Indonesia, for instance, Mrs Tien Suharto was nicknamed “Mrs 10 per cent” because of the cut she took on business deals.

What investors and entrepreneurs fear most is arbitrariness, where some pay huge sums in vain while others pay little or nothing and succeed. The sad stories of Nigeria and Zaire or Congo DR were largely due to rapacity, where top government officials simply extort, loot, and destroy institutions without concern for the impacts of their actions on the economy or society. This type of corruption has badly damaged or diverted development objectives, undermined economic growth, increased poverty, and is largely responsible for Africa’s underdevelopment. As Harriss-White argues, unlike many Asian states, such as South Korea or Taiwan, where public office corruption has often coincided with high, sustained growth rates, the African cases demonstrate that corruption linked to a top-heavy or swollen state and a predatory ruling group can have extremely debilitating consequences.

Much more fundamental however, are the quality of institutions. Where institutions work moderately well and are predictable, growth is possible even if the leadership is corrupt. But if institutions do not work, corruption will hasten the collapse of the economy. However, statistical studies indicate that strong legal and governmental institutions and low level of corruption have beneficial effects on economic growth and other economic variables. Similarly, more competitive economies suffer less corruption because they have fewer economic rents available for capture.

What this points to is the urgent need to begin the process of building strong and viable institutions that cannot be easily subverted or destroyed by subsequent rulers. The current trend of creating anti-corruption institutions can get the people excited and keep everyone busy, but it does not solve the problem. Those institutions remain highly susceptible to manipulation. Also, depending on the personal integrity of rulers is ephemeral at best. Sooner or later, a king that does not know Joseph will come and destroy everything. As Obama counselled in his first trip to Africa, what Africa – and I dare add Nigeria – need most is strong institutions and not strongmen.