Oil-fuelled and deep-rooted, corruption in Nigeria is bottomless. One man finally seems to be taking the problem seriously
Cars will drive themselves, banks will be redundant and oil majors will have become non-profits. Sounds utopian? Well, think again. The likes of Google and Tesla are working hard on the first. Bitcoins give us a taste of what the second may look like. And the third is already happening: battered by low oil prices, energy giants including ExxonMobil and BP reported their worst results in more than a decade yesterday.
Sadly the latter scenario also impacts entire countries. One of the worst affected is Nigeria, for which oil brings in 70 percent of government revenue. Africa’s largest economy has seen growth halve to about 2.9 percent last year; its foreign currency reserves have melted from $50 billion a few years ago to $28.2 billion today. A rainy-day fund that had accrued $22 billion by 2008-2009 now has $2.2 billion.
There’s not much Nigeria could have done to prevent the oil rout. But some of its pain is self-inflicted: endemic corruption means public money can vanish as quickly as oil through a cracked pipeline. Exactly how much is lost in the process has always been hard to estimate. But this week a report by PwC sheds a crude light on the problem.
To assess the impact of graft in Nigeria the consultancy compared the country to Ghana, Malaysia and Colombia, three fellow hydrocarbon producers. Although deemed less corrupt, it’s worth noting that these are not exactly clean. The Malaysian prime minister is currently being suspected of siphoning off $700 million from a state-owned fund.
Yet PwC found that Nigeria’s economy could have been 22 percent bigger in 2014 if its level of graft was on par with Ghana’s (which ranks behind Malaysia in Transparency International’s Corruption Perception Index). Were Nigeria more like Malaysia, its GDP could grow 37 percent more than projected by 2030. The additional input would total $534 billion – adjusted for inflation – or roughly as much as what the economy is currently worth.
By the end of the next decade, favourable demographics and a regional uplift mean Nigeria’s GDP should triple come what may. So you may wonder whether graft matters that much after all. But on this the report also has something to say: over recent years excess corruption has prevented about 25 million people from climbing over the poverty line, according to PwC. Oil wealth may have made Nigeria a richer country, but the diversion of spoils largely explains why 61.2 percent of its population still lives in absolute poverty. If nothing changes, the report says, graft will cost $2,000 per person a year by 2030.
Corruption hurts. The disappearance of public money is making itself felt in various ways: health, education and infrastructure decay; the economy is less sufficient because money is spent on unproductive stuff and well-connected people get jobs they don’t deserve. Graft also scares off foreign investors and frustrates ordinary people, providing them with little incentive to pay tax. So state coffers end up being hit twice.
Fortunately someone seems ready to take the ugly bull by the horns. President Muhammad Buhari, who’s said to have just $150,000 and 270 cattle under his name, was elected president last year on a promise to clean up the country. The Economic and Financial Crimes Commission (EFCC) has since arrested scores of senior politicians in an attempt to recover the “mind-boggling sums” Buhari says were stolen under the watch of Goodluck Jonathan, his predecessor. Investigated bigwigs include Sambo Dasuki, Jonathan’s former national security adviser, in a case involving the disappearance of $2.1 billion from the central bank. Yesterday it raided the office of the ex-vice president.
Buhari’s anti-corruption campaign will face tests. The EFCC is not known for its success at securing convictions; the president could also be branded as partisan if his crackdown solely targets members of the previous administration. Insiders say British and American have tried to discourage Buhari from going after his predecessor, as they fear this could jeopardise the positive precedent set by Jonathan when he relinquished power peacefully.
But Buhari, a former general, seems to be sticking to his guns. He has reasons to. On Monday, he asked the World Bank and the African Development Bank for $3.5 billion in emergency loans to help fund his nation's fast-growing state deficit. That’s about half what Lai Mohammed, a former minister, says has been stolen from the public purse between 2006 and 2013. Pursuing past wrongdoers may sound like a utopian quest – but if the country is to run on more than bitcoins it's probably a good place to start.