Ineffectiveness of foreign aid and grants due to rampant corruption in Nigeria

By Abhinash & Priya Chetty on May 19, 2024

Corruption is an illegal payment to a public agent to obtain a benefit that may or may not be deserved in the absence of payoffs.

Ackerman, 1999, p. 9

Corruption in Nigeria hinders the success of socioeconomic development programs, as it surrounds all aspects of political and public life in the country to the extent that Nigeria has been labelled to be affected by systematic corruption (Urien, 2012). In a report by the World Bank, it was noted that corruption undermines the allocation and delivery of public services, reduces the effectiveness of aid, and weakens the impact of development projects. This highlights the detrimental effects of corruption on the intended outcomes of foreign aid in Nigeria.

Corruption is any form of unethical behaviour that does not counter the norms and values of society. The behavioral patterns of individuals hurt public morality and leave even serious impact on society. The impact includes dishonesty, non-conformity to standard behaviour, and illegality (Osa et al., 2014). Many scholars agree that corruption hinders the proper allocation of funds for economic progress (Dimant and Tosato, 2018; Rose-Ackerman and Kornai, 2004;). Bannerjee, 2016; argues that corruption undermines social capital by decreasing trust, skews public priorities and disproportionately benefits a select few as opposed to the many (Newell, 2018).

Prevalence of corruption in Nigeria

Nigerian households were food insecure between 1999 and 2021, not because of famine but as a result of a gap in food supply and production in the country due to the debilitating influence of corruption (Ogunniyi et al.; 2021). As a result of nepotism, corruption is majorly responsible for the restricted growth observed in the socio-economic conditions of Nigeria, and the failure of its democracy, and governance. Nigeria is witnessing systematic corruption as all arms of the governance including the formal systems, and the strong collaborators in the private segment are involved in the mismanagement of funds in the nation. The corrupt practices prevail at political, bureaucratic, and electoral levels. Political corruption prevails in Nigeria as the highest level of the political authority responsible for formulating and establishing rules in the country performs embezzlement of funds. The bureaucratic tier including schools, licensing offices, hospitals, and lower-order ministries presents corruption on a daily basis.

The corrupt practices of an electoral nature include promises of official favour, intimidation, and coercion. Thus, the footprints of corruption could be witnessed at all levels such as public and private work  (Ajie & Wokekoro, 2012). Nepotism practices also form a major part of corruption practices as these include promotion and appointments in the awarding of major contracts such as infrastructure or health reforms (ActionAid, 2015; Urien, 2012).

Nepotism is the most prominent cause of corruption and mismanagement of funds in Nigeria. The psychological perspectives of the people in Nigeria promote the belief that if a family member has a job it becomes their duty to serve the purpose of the rest of the members. Thus, people with secure government jobs, feel indebted to use their position or power to help their relatives promoting nepotism in the country (Ugwu, 2015).

Other causes of large-scale corruption found in Nigeria can be attributed to the general ignorance of law and procedure in the country and increased feelings of self-benefactor. The concentration of power in the Centre at the hands of a few and the high interference of government in economic decisions also further worsens the situation (ActionAid, 2015).

A weak and corrupt government adds to the problem of corruption as it is incompetent to control and handle the corruption in the country. Low remuneration for public employees and poor reward systems lead to further corruption in the public segment. The unenthusiastic behavior of law enforcers leads to corruption among the officials and the belief that it goes unpunished motivates others to join the group too. Mismanagement of funds in the country has led to approximately more than US$157 billion in illicit transfers out of Nigeria. Large proportions of it were funds raised from corrupt practices and pilfering of the grant money. Reports by Transparency International (2017) further found in a survey that almost 41% of Nigerians found the government to be very corrupt.

Poor healthcare, education and socio-economic conditions due to heavy corruption

Fraud, theft, and corruption all go hand in hand with each other and are observably rampant in all strata of the Nigerian Society. The powerful and the wealthy class are the frontrunners in contributing to corruption in the country. Bribery, fictitious bank accounts, false salary vouchers, political pay offs, and unlawful payment in contracts contribute to the hindrance in the percolation of the effects of socio economic development programs in Nigeria (Abdulkarim, 2012). Administration is filled with cases of ghost workers, falsely inflated costs of contract, illegal enrichment to superior offices, partial and biased judiciary, alteration of official documents, and using official position for personal benefits, further contributing to diminishing development in Nigeria (Igbaekemen et al., 2014).

Failure of government to curb corruption has lead to loss in revenue as the funds get diverted from their allocated and intended use resulting in economic distortions, wastage of resources, and inefficiencies in the economy. The problem of disparate allocation of funds can be observed in the education budget of the country. Education is required for both social and economic development. Countries depend on education as a tool of socio-economic progress for its professional and economic growth. Improper allocations are restricting the growth in Nigeria as education segment receives barely 10% of the national budget. The minimum allocation prescribed by UNESCO is 26%, however, the percentage allocation for 2009 has been under 11% with only 8.44% was allotted to education in the year 2016 (Ololube, 2016).

The systematic corruption causes an increase in the cost of doing business in the country, infrastructure failure due to improper allocation of funds and poor delivery of services. It promotes sub-standard quality of goods and services in the country (Urien, 2012). This also tends to impact the quality of health of people. During the period 2008-09, 84 children died as a result of acute kidney failure resulting from the presence of industrial solvent diethylene glycol in the teething syrup manufactured by My Pikin. These deaths were tied back to the chemical dealer who supplied sub-standard provisions to the factory (Buckley, Gostin, Committee on Understanding the Global Public Health Implications of Substandard, Health, & Medicine, 2013). This indicates the status of weak quality system, plagued with corrupt practices.

Corruption also accentuates deepening of poverty, political instability, brain drain, and inefficiency in the public services. Nigeria despite of its large deposits of fossil fuel is facingdearth of poverty and have been categorized to be going through a ‘resource curse’. Revenues arising from energy are divided between the Nigerian government getting 80%, operating cost of mining 16%, and investors receiving 4%. It is estimated by the World Bank that in case of Nigeria, 80% of the energy revenue has been able to benefit only 1% of the population (Odularu, 2008). A study by World Bank on combating corruption, revealed that an audit of the Nigerian financials during the period 1999-2008 reported a total of $9.8 billion recoverable revenue, of which the Nigerian National Petroleum Corporation (NNPC) owed an estimate of $4.7 billion (World Bank, 2017). The greatest impact of corruption arises due to the poor choices and failure in setting priorities by the government (Abdulkarim, 2012).

Nigeria despite being an oil-based economy faces severe poverty. The economy relies largely on international grants and aid provided to the country by organizations and countries such as Aid & International Development Forum (AIDF), European Union, United Nations Children’s Fund (UNICEF), United Kingdom, United States and others. The aid are provided in form of technical cooperation, cash, commodity, and food. Donations are used to provide for food security, health maintenance, and infrastructure development in Nigeria (UNICEF, 2002).

Misappropriation of funds from international aid and grant programs in Nigeria

Like the other spheres of the Nigerian economy, misappropriation and theft are thriving in the internationsl Aid and Grant programs of Nigeria as well. The former chairman of Nigerian anti-corruption agency, Nuhu Ribadu provided the detail that the government officials indulge in embezzlement of these funds. He further quoted that by estimation, $405 billion allotted to development assistance in the country has been stolen by past leaders (Olawale, Tolulope, & Adeniran, 2016). Corruption obstructs the success of Aid and Grant programs in Nigeria, as it does not allow the funds to reach the people in need. Smith (2010), highlighted that even the best of intentions are caught up in corruptions in Nigeria. He further explains the statement by the help of highlighting the incident of fiddling with the $90 million loaned to Nigeria by the World Bank to fight HIV and aid (World Bank, 2014). The grant was targeted to provide assistance to eighteen Nigerian states. The State Action Committee on aid (SACA) responsible for supporting the efforts of local NGO’s in the misuse of these funds. The first request for proposal for competing for the grant was invited by SACA in 2004, three years after the allocation of funds. The competing bids were invited for merely $30,000 (Smith, 2010).

In the wake of increasing corruption in country the Global Fund to Fight AIDS, Tuberculosis, and Malaria recently in 2016, also suspended their funding to Nigeria. The suspension of the funding was due to large-scale fraudulence by the recipient organizations National Malaria Elimination Program (NMEP), Society for Family Health (SFH), the Association for Reproductive and Family Health (ARFH), NACA, and the Institute of Human Virology Nigeria (IHVN). Office of Inspector General responsible for auditing funds discovered a fraud of $3.8 million in utilization of funds in Nigerian operations . This led to discontinuation of the funds when the financial gap in the three diseases is as high as $5 billion (The Global Fund, 2016). The country has also lost the chance to gain on insight on other shortcomings of their economy.

Exploitation of these funds was also highlighted against Nigeria’s senators (Kazeem, 2016). The senator, Muhammadu Buhari has been reported to have done a large-scale fund misappropriation that was allocated to Nigeria by the UNICEF’s Nutrition division. A report by Financial Times disclosed that 2 million people were beyond the reach of the aid provided by UNICEF for a total of 4.5 million people (National Assembly, 2016). The total unaccounted funding was as high as $7.9 million, which could further worsen the situation of estimated 5.1 million Nigerians who are to face severe food shortage (Kazeem, 2016).

Foreign aid should accelerate the development of the economy, be used in assistance and development programs, majorly in the field of education, health, community empowerment, and environmental management. The delivery of the grants in Nigeria was rated moderately unsatisfactory by a report published by World Bank (2010). The report specifies that the grants issued by the World Bank in the period 1999 to 2008 were a failure in several cases. The aid provided during the period failed to address the clauses that were central to the objective of the World Bank. During the period, the country showed no signs of the reversal in the worsening of the state of the infrastructure or education quality (World Bank, 2010). The failure in the delivery system of the grant leaves the health sector in the country vulnerable. Ineffective civil service code of disbursement of grants, lack of adherence to rules, and weak accountability make the international aid ineffective in the case of Nigeria (Kamorudeen & Bidemi, 2012).

References

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Priya is the co-founder and Managing Partner of Project Guru, a research and analytics firm based in Gurgaon. She is responsible for the human resource planning and operations functions. Her expertise in analytics has been used in a number of service-based industries like education and financial services.

Her foundational educational is from St. Xaviers High School (Mumbai). She also holds MBA degree in Marketing and Finance from the Indian Institute of Planning and Management, Delhi (2008).

Some of the notable projects she has worked on include:

  • Using systems thinking to improve sustainability in operations: A study carried out in Malaysia in partnership with Universiti Kuala Lumpur.
  • Assessing customer satisfaction with in-house doctors of Jiva Ayurveda (a project executed for the company)
  • Predicting the potential impact of green hydrogen microgirds (A project executed for the Government of South Africa)

She is a key contributor to the in-house research platform Knowledge Tank.

She currently holds over 300 citations from her contributions to the platform.

She has also been a guest speaker at various institutes such as JIMS (Delhi), BPIT (Delhi), and SVU (Tirupati).

 

I am currently working as a Research Associate. My work is centered on Macroeconomics with modern econometric approach. Broadly, the methodological research focuses on Panel data and Times series data analysis for causal inference and prediction. I also served as a reviewer to Journals of Taylor & Francis Group, Emerald, Sage.

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