Friday, March 19, 2010

On Corruption...and considering the unpalatable

Guest post by Fatai Thomas

“BCCI's activities in Nigeria were so profoundly, overwhelmingly, corrupt as to suggest a very significant level of corruption in Nigerian officialdom generally. Whereas BCCI's activities in most countries merely involved corrupting a few, key people, in Nigeria, the corruption was systemic and endemic, and touched nearly every operation of the bank…According to BCCI officers, this was not the consequence of BCCI applying its practices to Nigeria, but rather, BCCI adapting itself to the conditions already present in Nigeria…”

Thus begins a United States Senate report, published in December 1992, which details an investigation into the collapse of the Bank of Credit and Commerce International, BCCI, and its activities in Nigeria.

BCCI was a unique institution. It was affectionately referred to as the “Bank of Crooks and Criminals International” by lawmakers, and during its 19 year history, more than lived up to that name. By the time of its collapse in 1991, it had become a key player in international financial crime on a massive and global scale. Its criminality included money laundering (on all continents), bribery of Government officials (on all continents), the financing of terrorism, arms trafficking, the sale of nuclear technology, involvement in prostitution, facilitation of tax evasion, smuggling and illegal immigration. You name it – they did it.

Ironic then, that BCCI, on entering the Nigerian market, had to become “more” corrupt in order to successfully develop its business. Or maybe not ironic…just sad, considering that report was written 17 years ago.

But why? Why has Nigerian officialdom remained so corrupt? The answer is deceptively clear – low wages. The solution, unfortunately, seems more complex – or so one would assume given the number of failed attempts at reform. But that would be ignoring the obvious. Corruption is an effect of a cause. Cease the cause and the majority of corruption will recede. Too simple? Let me explain.

The main point of entry into the Nigerian Civil Service is known as Salary Grade Level 08 (GL.08). This level of entry is specifically for those who hold a first degree. On joining, your base salary is NGN 35,610 a month – around $2,850 a year or $8 a day. Under the service rules, it would require a minimum of 27 years to attain the level of Director (GL.17), the second highest post in a ministry. The current salary of a Director is a maximum of NGN 189,273 a month – around $15,000 a year or $40 a day. The average age of a Director is 50.

To say Civil Service remuneration is poor would be an understatement. Contrast their earnings with the cost of living and the amount required for a reasonable quality of life and it becomes clear that Civil servants are actually the most disadvantaged of the “professional” classes in Nigeria. Even worse, despite their low wages, on occasion they are paid late.

Yet, it is from these particular Government employees we have to obtain the approvals, licenses, and permits which are critical to our existence and the operations of our businesses. There is an ancient Sanskrit word for the ensuing situation - Karma.

You see, what BCCI discovered, was that in Nigeria, Government employees left home every morning looking to be bribed. This was not a situation where officials waited passively for your winks and sly suggestions – no, Nigerian officials actively helped you in corrupting themselves and the more clean you appeared, the less they wanted to do business with you. And who could blame them – due to the unique aspects of our culture, some of these officials were largely responsible for supporting half of their villages.

But our propensity to be corrupted was just half of the story. There was something even more profound that BCCI realised. Something that made corrupting Nigerians unbelievably easy and inherently profitable – we were a cheap date. It is the proverbial no-brainer, Mr Oyinbo Esq., frustrated at the slow pace of his discussions, the discomfort of the 2-star hotel he is paying 5-star prices for, the weird food, the funny smells and the mosquitoes, realises it may be wiser to speed things up with a carefully placed bribe – and when he discovers how cheap it is, he wonders why he didn’t try that earlier.

Many before and after BCCI have exploited this fact. In February of 2009, the US Department of Justice entered into a plea agreement with Halliburton and KBR, the US Oil services companies, where both companies admitted to violating the Foreign and Corrupt Practices Act of the United States. Their crime was bribing Government officials in Nigeria to the tune of $180 million in exchange for contracts valued at $6 billion. Halliburton was fined $579 million for its transgression.

$180 million might sound like a lot of money – but that is just 3% of the value of the contracts awarded and less than a third of the eventual fine. It is likely that Halliburton would have paid at least that amount in fees to genuine professional advisers (legal, financial etc.) on the transaction. The fact that $180 million was sufficient to bribe three of our Heads of State, a large number of our Government officials, our oil industry executives and a main political party, shows just how cheap a date we are. Especially when it was our own money we were being bribed with.

Contrast that with the tens of billions reportedly paid by BAE Systems, the British arms company, as kickbacks in its arms for oil barter deal with Saudi Arabia, a transaction known as Al-Yamamah. One Saudi prince alone is reported to have received $2 billion. One wonders how much their Head of State got.

So how do we fix it? Well low wages (across the board) are just an output of a larger problem – the underdevelopment of the Nigerian economy.

Let us pretend we are the manufactures of an imaginary product. It sells for $1,000 and it costs $400 in raw materials, and $300 in labour to produce. Theoretically, assuming all our inputs are locally sourced, we contribute at least $700 to the economy for every item we produce.

But in the Nigerian economy, things happen differently. For various reasons including power, availability of raw materials, availability of skilled staff etc., we are forced to import this fictional product. So the $700 goes into someone else’s economy. But that’s not our only loss. We lose the potential skills development, the wage competition, the tax revenue, the capital investment and we even have to sell our product at a higher price to compensate for the increased production costs.

It’s lose-lose for everyone. And we have elevated it to an art-form. The leakage from our economy is astounding – $45 billion in 2008 alone – we literally support millions of jobs – just not in our own country.

Which brings us to the unpalatable suggestion – aggressive incentive based pay for public servants. There is a saying – if you pay peanuts, you will get monkeys – to meet the challenges ahead and create a viable Nigerian economy, we need to upgrade our public servants. Without a viable Civil service, the reforms, changes and policies that we need to address our dysfunctions will be impossible to implement.

Most will agree that there is a clear and proven linkage between the profitability of a career option and its ability to attract talent. Most will also recognise that there is also a clear and proven linkage between the needs of a business and its willingness to invest in skills development and the training of its employees to enable it to keep its edge in the market place. Making Government service a career path that can deliver legitimate wealth may do more for addressing corruption than further empowering our anti-corruption agencies – reducing the incentive to steal is likely to be just as effective as punishing theft.

But this is surely voodoo economics you must be thinking. Where will the money come from? How will we ensure the desired outcomes are achieved? Why not just focus on the private sector to provide the solutions?

All are good questions – but somewhat miss the point. We are already there – just not legitimately – our senior Civil servants are already making themselves intensely rich but with zero accountability. Introducing a proper and realistic incentive system would not only attract a better breed of civil servant, it could drive results – deliver 6,000 MW of power – receive substantial bonus for the entire department. Don’t deliver – you’re fired.

In Chinua Achebe’s legendary book “The Trouble With Nigeria”, he recounts how on the first morning of the Murtala Mohammed regime, the notoriously tardy Lagos Civil Service staff managed to find their way into work on time – regardless of the traffic and transport problems they had always complained about. Their new Head of State’s ferocious reputation was such that no one wanted to cross him on his first day in office.

Incentives work – positive or otherwise. Running Nigeria is a difficult and sometimes thankless task – a de-motivated workforce is the last thing the leadership needs. As we approach our fiftieth year, perhaps it’s time to try a new approach – after all, what more do we have left to lose?


Anonymous,  1:51 pm  

This post confirms to me really what I have always thought. Its clear that a LOT of Nigerians know exactly what the problem is and the solution to the problem is. I have read numerous articles on NVS and SAHARA reporters. BUT the solutions will not be impemented in a democratic Nigeria. The diversity and cultural differences in the region IS the problem. A new kind of government is needed that suits this country. A start will be to split the country in two. Northern Nigeria and Southern Nigeria. With the North being a Muslim state under sharia law and the south a more secular with elements of judeao-christian based principles. Population growth should then by reduced for at least 20 yrs, the current rate is unsustainable, however you look at it...


SHE 2:46 pm  

Well said! the idea is a fine one.

But then, one wonders, who is to introduce the "work hard for a bonus or be fired" approach?

What if that one is then corrupted by the people being incentivised, or more depressing still, are there still people who can be entrusted with such a task?

The importance of a positive attitude in the matter cannot be over-emphasised.

Anonymous,  7:00 pm  

isn't secular and judeo-christian contradictory.

the democracies we see in the US are based on reason and expressly reject religious foundations

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