Corruption is a pressing issue in Nigeria. President Muhammadu Buhari launched an anti-corruption drive after taking office in May, 2015. Corruption affects public finances, business investment as well as standard of living. Recent corruption scandals have highlighted the large sums that have been stolen and/or misappropriated. But little has been done to explore the dynamic effects of corruption that affect the long run capacity of the country to achieve its potential. Channels through which this may occur include:
- Lower governance effectiveness, especially through smaller tax base and inefficient government expenditure. PwC studies estimate Nigeria's tax revenues at 8% of GDP, which is the lowest for comparison countries
- Weak investment, especially FDI, as it's harder to predict and do business
- Lower human capital as fewer people, especially the poor, are unable to access healthcare and education
In this report we formulate the ways in which corruption impacts the Nigerian economy over time and estimate the impact of corruption on Nigerian GDP, using empirical literature and PwC analysis. We estimate the 'foregone output' in Nigeria since the onset of democracy in 1999 and the 'output opportunity' to be gained by 2030, from reducing corruption to comparison countries that are also rich in natural resources. The countries we have used for comparison are: Ghana, Colombia and Malaysia.
Our results show that corruption in Nigeria could cost up to 37% of GDP by 2030 if it's not dealt with immediately. This cost is equated to around $1,000 per person in 2014 and nearly $2,000 per person by 2030. The boost in average income that we estimate, given the current per capita income, can significantly improve the lives of many in Nigeria.
We believe this work provides robust evidence and impetus for reducing corruption in Nigeria.
In this paper, we estimate the negative impact of corruption in Nigeria
President Muhammadu Buhari launched an anti-corruption drive after taking office in May, 2015. This comes after a series of high profile corruption scandals in Nigeria that have highlighted the sheer size of the corruption problem.
In this paper, we explore the negative impact of corruption on Nigeria's GDP1.
To do this, we:
- first, analyse how corruption affects the economy over time;
- second, estimate the 'foregone output' in Nigeria by simulating lower corruption in the past 15 years; and
- third, estimate the output that Nigeria can achieve by simulating lower corruption in the next 15 years.
The lower corruption scenarios are simulated based on the corruption levels of benchmark countries.
In the next paper, we will explore how anti-corruption policies affect corrupt behaviours and which policies are likely to have the biggest impact in Nigeria.
Over a series of papers, we address the following questions:
- what is the impact of corruption on the Nigerian economy
- what is the cost of corruption in Nigeria
- which anti-corruption policies are most suitable to address corruption in Nigeria
- what policies can be used to reduce corruption
1 Referred to as ‘economic cost of corruption’ or ‘cost of corruption’ for simplicity
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