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Thursday, July 7, 2011

Impact of corruption on national development

Why is corruption a viable enterprise in poor countries including Nigeria? The causes of corruption are myriad; and they have political and cultural variables. According to Lipset and Lenz, there is a strong evidence points to a link between corruption and social diversity, ethno-linguistic fractionalization, and the proportions of country’s population adhering to different religious traditions. And studies note also that corruption is widespread in most non-democratic countries, and particularly, in countries that have been branded neo-patrimonial, kleptocratic and prebendal (NORAD 2000). Thus, the political system and the culture of a society could make the citizens more prone to corrupt activities. However, we shall focus on the fundamental factors that engender corrupt practices in less developed nations, including Nigeria. Some of the factors include:

1)       Great inequality in distribution of wealth;

2)       Political office as the primary means of gaining access to wealth;

3)       Conflict between changing moral codes;

4)       The weakness of social and governmental enforcement mechanisms; and

5)       The absence of a strong sense of national community (Bryce, 1921).

The lack of ethical standards throughout the agencies of government and business organizations in Nigeria is a serious drawback. The issue of ethics in public sector and in private life encompasses a broad range, including a stress on obedience to authority, on the necessity of logic in moral reasoning, and on the necessity of putting moral judgment into practice (Bowman 1991).

Other factors are poor reward system, greed, peer community and extended family pressures, and polygamous household. The influence of extended family system and pressure to meet family obligations are more in less developed societies. Bad rules and  ineffective taxing system, which makes it difficult to track down peoples financial activities, weak institutions and cultural values breed corruption.

Effect of Corruption on the socio-economic development of a nation

Hope and Chikulo in their volume stated that although the incidence of corruption varies among African countries, ranging from rare (Botswana) to widespread (Ghana) and systemic (Nigeria), the majority of the countries are in the range of widespread to systemic.

Corruption in Africa has now reached cancerous proportions and today has a demonstrable negative impact on the development process in the region. The effective of corruption is the same in both public and private spheres. It results in the misuse of scarce resources that significantly affect an entire economy through multiplier effects.

Corruption is negatively associated with developmental objectives. Controlling or eradicating corruption, they believe, takes on even greater significance in the quest for development.

Africa has attracted the lowest rate of direct foreign investment in the world as a result of corruption. A recent study of corruption index showed that a two-fold increase in the level of corruption is equivalent to raising the marginal tax rate by over 20 per cent, and a one percentage point increase in the marginal tax rate reduced foreign direct investment by 5 per cent.

It is believed that those who pay and receive bribes, just as it is the 

case in Nigeria, can expropriate a nation’s limited wealth. What this 

means therefore is that the private sector is forced to engage in rent-

seeking activities, rather than competitive activities, to make and 

maximize profits. When this happens, neoptrimonialism which is a 

perverse system that awards economic and political benefits to 

politicians and their followers, becomes pervasive.

In Africa, particularly in Nigeria, corruption flourishes as a result of distortions in the policy and regulatory regime and the weakness of institutions of restraint. Corruption affects the poor disproportionately, due to their powerlessness to change the status quo and inability to pay bribes, creating inequalities that violate their human rights.

Corruption hinders economic development, reduces social services, and diverts investments in infrastructure, institutions and social services. The World Bank5 distinguishes between two main forms of corruption: state capture and administrative corruption. State capture refers to the actions of individuals, groups or firms, both in the public and private sectors, who influence the formation of laws, regulations, decrees and other government policies to their advantage as a result of the illicit and nontransparent provisions of private benefits to public officials.

Administrative corruption refers to the intentional imposition of distortions in the prescribed implementation of existing laws, rules and regulations to provide advantages to either government or non-government actors as a result of the illicit and non-transparent provision of private gains to public officials. Investors will be reluctant to invest in development efforts in a country where there is state capture and administrative corruption. In addition, international donors would not lend to a country with high corruption affecting the human rights and right to development of poor people in that country.

Corruption can also be classified as petty (need based) and grand (greed based) corruption Petty corruption is found where public servants who may be grossly underpaid depend on small kickbacks from the public to feed their families and pay school fees. Grand corruption involves high officials who make decisions on large public contracts6. Here too, there is a negative impact on the poor as they cannot afford to provide any gains to public officials, or if they do, it constitutes a great part of their earnings which they could have otherwise used for their own subsistence or development.

Corruption no doubt negatively impacts economic growth and reduces public spending on education.

The effect of corruption on education is well captured by Costello who said that Nigeria has enough money to tackle its poverty challenges. If the government can win its battle against corruption and mismanagement, the money will start to turn into functioning schools, health services and water supply, thus laying the foundation to eradicate poverty. The effect of corruption on education, according to Shleifer & Vishny, comes from the fact that the government spends relatively more on items to make room for graft. And corrupt government officials would shift government expenditures to areas in which they can collect bribes easily. Large and hard-to-manage projects, such as airports or highways, make fraud easy. Poverty and income inequalities are directly linked to corruption. It is important to mention here that development projects are often made unnecessarily complex in Nigeria to justify the corrupt and huge expense on it. A typical example is the new Abuja stadium which cost about 30 billion Naira to complete.

Corruption wastes skills, as precious time is wasted to set committees to fight corruption, and monitor public projects that are often abandoned by unscrupulous politicians and contractors. It also reduces the quality of products and services offered to the public by some unscrupulous companies. Corruption brings about political instability. It can cause social revolution and military coups, as we have seen in some poor countries around the world, including Nigeria. Even in business transactions, bribery and corruption create the culture of late payment, and delays and refusal to pay for services already executed.

The image of a nation where corruption is prevalent is badly tarnished. Nigeria has been badly affected even more than most African countries and other societies due to an appalling international image created by its inability to deal with bribery and corruption.

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