Nigeria may lose 37% of GDP to corruption

01 February 2015, Lagos – Corruption could cost Nigeria about 37 per cent of its Gross Domestic Product by 2030 if the situation is not addressed immediately, a new report has indicated.

Nigerian economyThe report, Impact of Corruption on Nigeria’s Economy, equates this amount to about $1000 per person in 2014 and nearly $2000 per person by 2030.

The report, which was conducted by a global professional advisory firm, PricewaterhouseCoopers, was presented to the Federal Government on Friday.

Vice President Yemi Osinbajo received the report from the PwC team, led by its Regional Senior Partner, West Africa, Mr. Uyi Akpata, at the Presidential Villa in Abuja.

The report centres on the ways corruption has affected the Nigerian economy over time.

According to a statement by the PwC, the firm believes the report has provided robust evidence and impetus for reducing corruption in Nigeria.

The statement read, “The results of the study show that corruption in Nigeria could cost up to 37 per cent of Gross Domestic Products 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”.

PwC said the report used five steps to estimate Nigeria’s cost of corruption, noting that the first step was to examine over 30 studies to understand the way that corruption affects the GDP in Nigeria.

It said the study was obtained from international organisations including the Organisation for Economic Co-operation and Development, International Monetary Fund, Department for International Development and Transparency International.

Akpata said the IMF study was selected to estimate impact of corruption on economic growth.

The second step, he added, was to identify the impact of corruption on economic growth using the IMF study.

The study estimates that the impact of one-point change in the corruption index results in a 1.2 percentage point change in economic growth per annum.

The study’s methodology – calculating impact on growth when a country moves from its own rank to another country’s rank on the corruption index was also used.

Transparency International’s Corruption Perceptions Index was also used as a proxy for corruption.

According to the PwC, the dataset defines corruption as the ‘abuse of public office for private gain’ and the index was categorised into three parts, namely grand corruption, petty corruption and political corruption.

The fourth step in the report created three scenarios that show lower levels of corruption that Nigeria could have achieved in the past and can achieve in the future while the fifth step calculated the impact of corruption on economic growth and output for each scenario.

The PwC Chief Economist and co-author of the report, Dr. Andrew S Nevin, said the firm formulated the ways corruption had impacted the Nigerian economy over time and then estimated the impact of corruption on its GDP, using empirical literature and the PwC analysis.

He said, “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.”

 

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