PhD: Pilfering of High Degree?

Published on 6th June 2006

Part 2  

 

The Deleterious Effects of Corruption

 

The worst part of corruption in Africa is that the thieving elites do not invest the booty in their own country as did America's "robber barons" in the nineteenth century. Rather, using Nigeria as a case in point, they lavishly spend the booty on mistresses, luxurious automobiles, fabulous mansions -- on consumption, not productive ventures. The rest of the loot is spirited out of the country into foreign bank accounts to develop the already advanced countries.

 

Inefficiency

 

Corruption breeds inefficiency and waste. Contractors and suppliers fail to deliver because they have bribed some official. Who you are and how big a kickback you offer matters more than how well or efficiently you perform a job. As a result, contracts are inflated and some kick backs paid to some conniving official. Work done is shoddy: Roads are poorly constructed and washed away at the first drop of rain. Telephones refuse to work, postal service is non-existent and the entire communication system is in shambles, costing the country billions in lost output.

 

Infrastructure has crumbled in Nigeria because contractors failed to perform. The educational system has sharply deteriorated. Roads are pot-holed. Hospitals lack basic supplies because they have been stolen or diverted, and patients are often asked to bring their own bandages and blankets. State institutions decay and break-down. Nobody cares because tenure of office and promotions are based not on competence and merit but on personal loyalty to the president, ethnicity, and sycophancy. Institutions such as the civil service, the judiciary, parliament, and the police disintegrate and fail to function since they have all been perverted.

 

Parliament becomes a joke -- a rubber-stamp. The police, the military and the civil service -- all are hopeless. Even though the state soaks up scarce resources (through heavy taxation), it fails to fulfill its role in facilitating economic growth or deliver essential services. "Nigeria has many fine lawyers, but the judiciary is tainted by trials settled with bribes. It has fine academics, but universities are tarnished by the trade in diplomas. It has respected chiefs, but the nobility has been mocked by the sale of chieftaincy titles. In many ways, the institution which has suffered the most under this military regime is the military itself. `Military men are not soldiers anymore' is a common Nigerian observation.

 

Institutional break-down and the failure to provide the most basic essential services creates an environment inimical to development. The cost of doing business in such an environment increases enormously. Simple, routine applications takes weeks to be approved. Security of persons and property can seldom be guaranteed. Increasing production becomes chancy, given intermittent disruptions in the supply of electricity and water.

 

Soaring Government Deficits

 

Second, corruption aggravates the budget deficit problem. Expenditure figures are padded. Ghost workers proliferate on government payrolls. An audit task force appointed by the Nigerian Government discovered 28,000 `ghost workers' on the state payroll. The `ghost workers' are either fake, retired or dead persons whose names remain on the payroll for fraudulent officials to claim their wages. Revenue collectors are notoriously corrupt, pocketing part of tax proceeds, waiving taxes if they receive large enough bribes.

 

Deters Foreign Investment

 

Third, corruption drives away foreign investors: Government contracts in Nigeria, say international businessmen, are among the most expensive in the world mainly because of excessive margins built into such contracts for personal interests.

 

 Africa has remained a wilderness to foreign investors for a variety of reasons: weak currencies (except notably in extractive industries, where output is priced in dollars), exchange controls, a feeble local private sector, poor infrastructure, small domestic markets, stifling bureaucracy, political instability, uncertain legal system, and corruption. Despite fanciful ads, elaborate investment codes, and guarantees of profit repatriation, Africa attracts very little of the direct investment going to the developing countries.

 

Why should foreign investors be excoriated when Africa's kleptocrats do not invest their own wealth in their own countries? Asked Herman Cohen, former U.S. Assistant Secretary of State for African Affairs in 1991.Over the last 10 years, Africans themselves have exported $20 billion a year into bank accounts in Europe [and the U.S.] buying real estate. So if Africans don't have confidence in their own continent, why should the rest of the world?

 

Economic Contraction and Collapse

 

Fourth, corruption leads to economic contraction and collapse. Corruption and capital flight, which flourish under non-democratic systems, seriously stunt economic development. At an April 2000 press conference in London, U.N. Secretary-General Kofi Annan lamented that: “Billions of dollars of public funds continue to be stashed away by some African leaders – even while roads are crumbling, health systems have failed, schoolchildren have neither books nor desks nor teachers, and phones do not work.” While corruption and capital flight exist under all political systems, their incidence tends to be more pervasive when rulers are not held democratically accountable.

 

Africa's experience shows that a corrupt government is incapable of efficient economic management and eliciting the sacrifices necessary for the development effort. A corrupt African government cannot attract foreign investment or spur domestic investment. Like the colonial state, the predatory African state is also extractive. Under colonialism, Africa's resources and wealth were plundered for the development of metropolitan European countries. Today the tiny, parasitic ruling elites use their governing authority to exploit and extract resources from the productive members of the society. These resources are then spent lavishly by the elites on themselves or siphoned out of Africa. As Robinson (1971) asked plaintively: " What incentive does the peasant have to produce more when through taxation the surplus is siphoned off to be spent in conspicuous consumption?"

 

Popular Rebellion and Social Upheaval

 

Nigeria's oil wealth is produced in the Niger delta, which has been the scene of increasingly violent rebellion. Nigeria's state oil company, working with partners that include Shell, Chevron, Mobil, Amoco and Texaco, produces 2.4 million barrels of oil — worth $30 million to $40 million -- each day. But for years, most of that river of cash has flowed to military governments that have broken promises to spend fixed percentages of it to bring electricity, clean water, village clinics, and schools to the oil belt. The regime of General Sani Abacha, for example, promised to return 13 percent of Nigeria's oil proceeds to develop the oil communities but the funds were siphoned off by corrupt officials. "If we would honestly put even 3 percent of the oil revenues into these communities, it would make a big difference”, said Frank Efeduma, a Shell oil spokesman in Warri, Nigeria.

 

The entire delta area with 6 million people, consisting of 20 tribes, has been devastated. As The Washington Post (Nov 9, 1998) put it: "The curse of natural wealth has fallen heavily around the Niger River delta, Africa's most lucrative oil field. Nearly 40 years of oil production, directed mostly by military governments, has left the delta peoples poorer, sicker, less nourished and less educated than the rest of the country. For instance, in Nembe, home to several thousand people on the edge of Nigeria's largest oil field, there is no electricity, clean water, or roads or other basic amenities. In a policy that defies economic sense, oil is piped from the delta area hundreds of miles to the north, where it is refined to provide employment and industrial activity to the Hausa-Fulani, who have monopolized political power since Nigeria's independence in 1960.

 

Hardest hit in the Niger delta are the Ogoni, who number 500,000 and sit on top of billions of dollars of oil reserves. But "we get no benefit from it, absolutely none”, complained Chief Edward Kobani, a senior elder of the Ogoni. Their homeland is an environmental mess. Gas — a by-product of the oil industry for which there is no use — is burned 24 hours a day, producing acid rain and toxic pollution. Air and water quality has suffered, and crops damaged. The health toll is enormous: There are high levels of skin rashes, allergies, abscesses and infections. Ken Saro-Wiwa started the Movement for the Survival of the Ogoni People (MOSOP), demanded $10 billion for environmental damage and royalties from the federal government and Royal Dutch/Shell, and threatened to secede the area from Nigeria. The group wrote an Ogoni national anthem, designed a national flag, and printed a national currency. Frightened of another Biafra, the military government attacked Ogoni villages. In May 1995 Saro-Wiwa was arrested; he and eight others were hanged on November 10, 1995 despite a chorus of international pleas for clemency. But the Ogoni have not given up their fight; nor have others in the Delta region.

 

The delta youths demand not just equity from the state but also in the redistribution of income from their oil. A first attempt at secession was led by Isaac Adaka Boro, who called for a Niger Delta Republic in 1965. The rebellion was short-lived and faded into history, but the anger in the delta was reignited with Saro-Wiwa’s MOSOP. The Abacha military regime, as well as western oil companies, felt threatened. Despite Saro-Wiwa’s hanging and the militarization of the entire Ogoniland, the groups were not deterred.

 

Since December 2005, incidents in the Western part of the delta have regularly shut down about 10 percent of the country's oil production. Four foreign workers were abducted in January by the Movement for the Emancipation of the Niger Delta (MEND) and were held for three weeks before being released. The attacks have escalated with such ferocity that there is much concern about Nigeria holding together as a country. On Feb 18, 2006, MEND launched a string of attacks on the country's oil industry, abducting nine foreign workers, bombing a major tanker loading platform and sabotaging two pipelines. These forced Royal Dutch Shell to suspend exports from the 380,000-barrel-a-day Forcados tanker terminal, and shut down the 115,000-barrel-a-day EA oilfield as a precaution. The Forcados loading platform, which is located about 20 kilometers offshore, was set on fire while a pipeline was blown up.  [The nine foreign contractors who were kidnapped -- three Americans, two Egyptians, two Thais, one Briton and one Filipino national working for Willbros Group of Houston -- were working on a pipe-laying barge. They were released on March 27 without harm.] As a result of these attacks, Nigeria's oil production was cut by 455,000 barrels a day out of a total of about 2.4 million barrels, or by about 20 percent. The effect was to push up crude oil prices sharply: Brent crude oil for April delivery jumped $1.57 a barrel, to $61.46, on London's ICE Futures exchange.” ''We would expect the potential for further chaos in Nigeria to provide a floor for prices above $60, and we expect that Nigeria will continue to be a major issue in terms of supply security,'' Kevin Norrish, an analyst at Barclays Capital in London, wrote in a note to investors.

 

MEND said the attacks were a response to military air raids in Delta State and would be followed by another wave of violence ''on a grander scale.'' The militants are determined to cut Nigeria's oil production by 30 percent and have warned all foreign workers to leave the delta immediately. The militants want more local control over the Niger Delta's vast oil wealth and the release of two ethnic Ijaw leaders, including a militia leader who is on trial for treason. 

 

The ferocity and frequency of the recent attacks have alarmed observers. First, they threaten to destabilize the global oil supplies, spiking up prices. More unsettling, the attacks breed their own perverse incentive for more attacks. The militants derive their funds from “bunkering” – the practice of siphoning off oil from pipelines for sale on the black market. Attacks, which partially shut down  oil supplies to the world market, raise oil prices, yielding greater revenue from “bunkered oil” to finance purchase of arms for more attacks. Second, the attack are exacerbating political tensions and the climate, which had already deteriorated due a misguided bid by supporters of President Obasanjo for a constitutional amendment to permit a third term. Fortunately, the Senate on May 15 shot down that bid.

 

Although the attacks have been directed primarily at Royal Dutch Shell, the oldest and largest oil producer in Nigeria, their real target is the government, said Sebastian Spio-Garbrah, an analyst at the Eurasia group, a private research firm. Efforts to defeat militant groups militarily have floundered, enabling them to carry out several audacious attacks on oil facilities.

 

The Obasanjo regime, though far better than the string of military gangster regimes it succeeded, has been scandalously incompetent and hopelessly ineffective in tackling the myriad of social ills confronting Nigerians. Provision of basic social services – clean water, reliable electricity, etc. – remains sporadic and anemic. And since President Obasanjo took office in 1999, ethnic and religious fighting, land disputes and conflicts between communities have driven more than 3 million Nigerians from their homes, according to the National Commission for Refugees, which also said the problem of internal displacement in Nigeria, Africa's most populous nation, was worsening and appeared to be a permanent feature of society.

 

The commission said the problem of displaced people stemmed from three decades of military rule that caused deep but repressed anger within society. The return to civilian rule in 1999 allowed frustrations to surface and erupt into conflict. At least 14,000 Nigerians have died in ethnic, religious or communal fighting since 1999, according to conservative estimates of human rights groups. In the most recent outbreak, religious riots in February, 2006 in Maiduguri, in the north, killed up to 50 people, mostly Christians, and left many more homeless. Those killings sparked reprisal murders of Muslims in Onitsha, in the south, where thousands fled their homes, seeking refuge in army barracks or leaving the area altogether.  Many disputes that lead to displacement begin over land or political control of local areas and later take on an ethnic or religious dimension, the commission said (The New York Times, March 14, 2006).

 


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