Is Corruption the Reason for Nigeria’s Underdevelopment?

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Corruption is systemic and cultural in Nigeria, and it has been said to be the single greatest obstacle preventing Nigeria from achieving its enormous potential. Yet it is a global issue that transcends national boundaries. Governments of virtually all countries are trying to eliminate it, either sincerely or at least nominally. In fighting corruption, Nigerian governments have made an idol out of it by blaming if for their inability to do what they promised to do when they campaigned for office. Nosa James-Igbinadolor proposes the case against corruption as the ‘deity’ responsible for Nigeria’s underdevelopment

Economic growth is the single most important factor influencing poverty. According to the IMF, abundant statistical studies have found “a strong association between national per capita income and national poverty indicators, using both income and non-income measures of poverty”.

It is generally agreed that “sound policies” ought to be judged by their efficacy in fulfilling the socio-economic objectives of steady growth, full employment, price stability, and a viable external payments situation, as mandated by the prevailing socio-political consensus, and framed by the underlying economic structure and institutions.

Notwithstanding, a 1995 study by Australian Economists, Palle Andersen and David Gruen, shows that a macroeconomic policy framework conducive to growth can be characterised by five features. They are: a low and predictable inflation rate; an appropriate real interest rate; a stable and sustainable fiscal policy; a competitive and predictable real exchange rate; and a balance of payments that is regarded as viable. Countries with these macroeconomic characteristics tend to grow faster than those without them, though there are many individual cases of both developing and developed countries suggesting that satisfying only some of these conditions does not sustain strong growth.

Between 2002 and 2015, the Nigerian economy experienced an astronomical rate of growth. However, such level of growth did not translate to the expected increase in employment opportunities and poverty reduction on the ground.

While average growth rate between 1990 and 1999 was a little over one percent, the Nigerian economy grew by as much as 15.33% in 2002, 7.35% the following year, 9.25% in 2004, and between 6% and 7% in the succeeding years, until the coming to power of the Buhari administration.

Under the Buhari administration the Nigerian economy is to all intents and purposes in ‘intensive care’. In 2016, the economy grew at -1.62%, 0.81% in 2017 and an average of 1% in the subsequent years.

It was the Economist Magazine that lamented the perilous state of the Nigerian economy as “stuck like a stranded truck. Average incomes have been falling for five years; the IMF thinks they will not rise for at least another six…”

A February 2021 report by Bloomberg noted that “Africa’s most populous country exited its second recession in four years in the fourth quarter of 2020, with economic growth of 0.1%. The economy shrank 1.9% last year, the biggest contraction in more than two decades.

Economic growth has lagged behind population growth rates every year since Buhari came to power in 2015, leading to a decline in average income per capita.

The impact of the coronavirus pandemic will push 20 million more Nigerians below the poverty line by 2022, according to the World Bank. About 80 million of the country’s population are classified as extremely poor, the highest number of any nation.

A recently released labour force report from the National Bureau of Statistics (NBS) put Nigeria’s unemployment rate as of the end of 2020 at 33.3% from 27.1% recorded as of Q2 2020, indicating that about 23,187,389 (23.2 million) Nigerians remain unemployed, with five million Nigerians losing their jobs between June and December 2020.

The unrelenting jobless rate according to Bloomberg, means that Nigeria now possesses the second highest rate of unemployed in the world, and is set to become the country with the highest rate of unemployed in 2022.

In spite of all these depressing numbers and more, the Buhari administration still has a fetish obsession with seeing corruption as the major driver of economic ill-growth rather than the government’s bad macro-economic policies since 2015.

While some scholars argue that corruption increases cost and leads to doubt in the intentional spheres, others posit that corruption has a negative effect on the ratio of investment to GDP thus affecting economic growth. It has also been argued that corruption discourages investment and distorts the composition of government spending usually to the detriment of future economic growth.

On the other hand, Emmanuel Anoruo and Habtu Braha are of the view that corruption can be growth enhancing in the sense that with the help of corruption, efficiency in the economy is improved. This is so because strict measures that are imposed by the government, impeding investment and other economic decisions favourable to growth are removed. Therefore, corruption according to these scholars “greases the wheel”

It is commonly agreed that corruption distorts the allocation of resources by diverting much-needed capital for economic development to corrupt officials’ pockets. Thus, a high-level corruption in a country is detrimental to its economic growth. Yet some countries achieve rapid growth under rampant corruption.

Shaomin Li and Judy Jun Wu’s study on ‘Corruption, Trust and Economic Growth’, concluded that, “if we make a simple plot (graph) to view the relationship between the level of economic development measured by income per capita and perceived corruption level across countries, we will get an interesting and mixed picture: it seems that growth rates diverge more for countries with high level corruption. In other words, while many highly corrupt countries have low economic growth rates, there are countries that have achieved rapid economic growth under rampant governmental corruption. This at least suggests that some countries may achieve high economic performance despite high corruption.”

China, according to Shaomin Li and Judy Jun Wu provides such a case. Both domestic public opinion polls in China and surveys by international organizations show that the level of corruption in China is high, deeply rooted, and widespread. “In spite of the rampant corruption, the Chinese economy has been growing rapidly, with an average annual growth rate of approximately 10 per cent. Moreover, China is not alone; there are other countries that have relatively high corruption and economic growth rates. Presumably, one can argue that this is because there are many factors that affect economic growth and corruption is only one of them.

“In China, due to the monopolistic control of most economic resources by the government, corruption is rampant. The widely accepted view in China is that “power cannot be deposited in a bank, so you had better profit from it while you can.”

While the misuse of resources and power for private gain has no doubt negatively affected the Nigerian economy since independence, what has determined underdevelopment and motivated a lack of sustainable growth in the economy has been primary the prevalence and dominance of bad macroeconomic policies that have helped to trap the country in a downward spiral of falling economic activity and diminishing economic welfare.

While the desire to see national income grow in real terms in a way that can be sustained in the future, without generating other significant economic problems is fundamental, for a developing country like Nigeria, further development is often the primary goal; that desire to increase the longevity of the population, increase access to education, and attain a decent standard of living.

Bad government policies have sustainably pushed back violently against economic growth and development. The incestuous fetish obsession with fighting ‘corruption’ has been more pronounced since 2015. As corruption has been ‘fought’ under the Buhari administration, the economy has continued to sink and totter to recession and non-growth.

The idea that the totem of ‘fighting corruption’ is the magic wand for driving economic growth and development cannot but be untrue.

Anna Marie Santacreu and Heting Zhu’s analysis of the ‘Miracle of the Han River’, the period of rapid economic growth in South Korea, following the Korean War (1950–1953), during which South Korea transformed from a developing country to a developed country, show that corruption cannot and should never be used as an excuse for not growing and developing an economy. As they noted, following the Miracle on the Han River, South Korea has been held as an economic model for other developing countries and acceded to the G20 in November 2010, capping a successful sixty-some years of rebuilding and modernisation.

South Korea experienced one of the largest economic transformations of the past 60 years. It started as an agriculture-based economy in the 1960s, and is currently the 10th largest economy in the world in terms of gross domestic product, and ranks 13th in purchasing power parity GDP in the world, identifying it as one of the G-20 major economies. It is a developed country with a high-income economy and is the most industrialized member country of the OECD. South Korean brands such as LG Electronics and Samsung are internationally famous and garnered South Korea’s reputation for its quality electronics and other manufactured goods.

Many studies attribute South Korea’s structural transformation to policy reforms aimed at opening the country to foreign markets. Indeed, the export-oriented policies of South Korea are one of the most important factors of its success: South Korea is now the fifth largest exporter in the world.

Two additional factors have contributed to the increase in international trade and industrialization in South Korea; an improvement in the business environment as well as policies incentivizing investment in innovation.

Santacreu and Zhu note further that South Korea dominates in the ease to start a business and enforcing contracts. which play a significant role in encouraging investment, production, communication and, eventually, economic growth.

Furthermore, “South Korea has devoted extra attention to technology development and innovation to promote growth. Innovation and technology are the key factors that have underpinned South Korean export competitiveness and fuelled the country’s remarkable economic rise over the past decades.5

“In fact, South Korea is now spending the largest share of its GDP on research and development (R&D), even larger than the U.S. and Japan, two of the global leaders in innovation based on R&D intensity. Between 1996 and 2015, South Korea’s R&D intensity grew 88.5 percent (from 2.24 percent in 1996 to 4.23 percent in 2015), while the U.S.’s only grew 14.4 percent (from 2.44 percent in 1996 to 2.79 percent in 2015)”.

Yet, the Generals and Politicians that drove the economic miracle of the 1950s to the 1980s would in later years be convicted and jailed for corruption and stealing billions of dollars.

In 2018, former South Korean president Lee Myung-bak was sentenced to 15 years in prison, becoming the country’s fourth ex-leader convicted of corruption. He was also fined 13bn won (£8.8m) after Seoul Central district court found him guilty of bribery and embezzlement. Lee served as president from 2008-2013 and his conviction followed the jailing in April of his successor, Park Geun-hye.

Chun Doo-hwan, the president from 1980-1988, and Roh Tae-woo, the president from 1988-1993, were convicted of bribery and sedition in 1996.

In 2017, the country’s first female President, Park Geun-hye was jailed for 20 years over a vast corruption scandal that led to her downfall from power. She became the fifth leader of that country to go to jail.

Despite the theft of billions of dollars by South Korea’s politicians and military generals over the years, sensible economic policies were able to transcend the large-scale corruption of the period and helped to transform the Korean economy into the behemoth it is today.

In the midst of corruption, the South Korean economy ballooned.

Global economic history is replete with modern economies that transited from feudal and agrarian based societies into industrialised, mass producing economies in the midst of obvious corruption.

The excuse of corruption as the most critical barrier to economic growth and development cannot stand harsh interrogation.

Corruption is bad and it must be fought, if not eliminated, but it must never be the reason the country’s incompetent leadership throw at it’s followership for not creating jobs and driving industrialisation and development.