Business

Public Procurement Corruption: Causes, Remedies (1)

Published

17 years ago

January 4, 2010

This is a paper he presented in Port Harcourt at a forum organised by the Bureau of Public Procurement.

According to the Organization for Economic Cooperation and Development (OECD), “procurement is the process of identifying what is needed; determining who is the best person or organization to supply this need; and ensuring what is needed is delivered to the right place, at the right time, for the best price and that all this is done in a fair and open manner”

Public procurement procedures often are complex. Transparency of the processes is limited, and manipulation is difficult to detect. Few people becoming aware of corruption complain publicly, since it is not their own, but government money, which is being wasted. Governments at federal, state, and local levels, spend significant public resources on procurement. Procurement at all levels of government in developing countries like Nigeria typically constitutes about 45 percent of the total Gross Domestic Product (OECD, 2006). These expenditures are critical to enabling governments to deliver goods and services to citizens, but they are also extremely vulnerable to corruption.

For almost a decade now there has been a significant international focus on corruption as a threat to economic and human development. Several multilateral organizations, like the UN, the World Bank, the WTO and OECD, aims at fighting the problem. So far, however, the strategies to transform the alleged practices of a state administration from corrupt to honest and clean have failed in most cases. There are several ways to explain this persistence of corruption. The time it takes to curb the problem may have been underestimated. There may also be a failure in the adjustment of anti-corruption strategies to local conditions. And finally, the incentives to implement the necessary measures may be poor among politicians benefiting from the current system.

However, in countries where corruption is a common problem it tends to disturb the market mechanisms and impede economic development. Corruption in public procurement makes the officials or the politicians in charge, purchase goods or services from the best briber, instead of choosing the best price-quality combination. The result may be construction projects several times as costly as necessary, or the acquisition of goods not actually needed. Hence, when aggregated to a macro-economic level non-optimal choices of contractors can have noticeable effects on the economy.

Also the efforts of public officials to get into position for obtaining bribes may represent a significant cost. Gifted youth often prefer jobs in the bureaucracy instead of more scientific professions, the allocation of public funds may be biased in favour of capital intensive sectors at the expense of health and education, and laws and regulations may be introduced just in order to obtain bribes. Even worse, public sector corruption has a pervasive impact on the poor since it reduces the funding available for social services and distorts public choices in favour of the wealthy and powerful, resulting in larger income differences between rich and poor.

Corruption, as an illegal activity, is difficult to define exactly as different attitudes and customs prevail, for instance when it comes to gift-giving and bureaucratic integrity. However, this paper is mostly concerned about the clear-cut cases, where no doubt about the misuse of public office exists. This is usually the case when the following conditions are all met.

1.First, the act must be intentional and in conflict with the principle of objectivity in public service performance. This implies that the rule that is broken is precise and transparent.

2.Second, the person who breaks the rule must derive some recognizable benefit for him/herself, his family, his friends, his tribe or party, or some other relevant group.

3.Third, the benefit derived must be seen as a direct return from the specific act of “corruption”.

CAUSES

The logic of incentives makes it reasonable to assume that human greed explains most of the bureaucratic corruption. However, in many developing countries, where monthly wages for ordinary officials often are less than $100, the actual need may be an equally prevalent reason. In some cases these wages represent a capitulation wage. According to Besley and McLaren (1993) capitulation wage refers to a situation where the government “capitulates” because corruption is endemic and monitoring does not function. Thus, it makes no sense to revise salaries and the government pays very low wages, aware of the bureaucrats’ ability to manage on bribes and stealing. The bureaucrats’ demand for bribes is understandable under such circumstances. Nevertheless, it is observed in many countries that officials covering their economic need by the help of bribes do not stop when they reach an acceptable standard of living.

The supply side incentives may appear less obvious because bribes often represent a significant cost to a company. Preparing for a tender is a costly and time consuming process and the company may not trust their winning chances on legal basis alone. A bribe may thus ensure that the company obtains the government contract. Corruption may also help companies obtain a de facto monopoly situation, to retain business, to obtain secret information, to counterbalance poor quality or high price, to facilitate trade or investment, or to create demand for goods that otherwise would not have been purchased. Other motives may be to reduce political risk, to receive import licenses, to reduce taxes and attain special modifications of laws or just to induce government employees to perform their duties. Despite the secrecy in these cases, it is not difficult to exemplify incentives from the media and court cases.

The major reason for bribery in public contract assignment, however, is probably because everyone believes that everyone else is involved in such kind of business. Losing a contract because a competitor bribed the officials must be very frustrating. This problem of hidden information is reflected in the way that all the companies involved pay a bribe even if they would be better off with no corruption (prisoner’s dilemma). Hence, the companies that bribe public officials seem to forget the negative externality they impose on other firms, as well as the worsening of their economic environment. For the company involved there are several common drawbacks related to bribery. One is the information about the bribery in hand of the public officials, information applicable to hit the reputation of enterprises, the multinationals in particular. A problem is also enforcement that a bribing company has no judicial guarantee of obtaining what it has paid for (unless the courts are corrupt as well). And, once a company has established a corrupt relationship it may be confronted by unexpected demands for additional payments. Ending a corrupt relationship is often difficult because of the risk of menaces, violence and other criminal activities. Apart from this, close connections to the government may imply a risk in case of political and governmental changes.

Adebowale, is the Managing Partner, Proactive Projective Limited.

Seun Adebowale

Business

Bayelsa To Spend N1.24trn As Diri Presents 2027 Appropriation Bill …Works, Education, Sports, Others Gulp Lion’s Share

Published

15 hours ago

November 6, 2026

The Tide

Bayelsa State Governor, Senator Douye Diri has presented the 2027 Appropriation Bill of the State to State House of Assembly.
Christened the ‘’Budget of Assured Prosperity for Sustainable Growth and Development”, the appropriation bill was based on a projected revenue of N1,242, 688,970,520,22.
The Governor said the 2027 proposals were derived from broad stakeholder engagements involving traditional rulers, technical experts, the organised private sector and citizens across the state, noting that it was a historic budget being the first as the state was beginning its fourth decade and presented at a time sustained investments were visible in all the local government areas.
“Our fiscal priorities remain clear: roads and bridges that connect communities, better health and education services, reliable power and an environment in which businesses and families can thrive”, he said.
Presenting the estimates, governor Diri said N840.791 billion representing approximately 68 per cent was proposed for capital expenditure while recurrent expenditure was put at N401.897 billion representing approximately 32 per cent.
He observed that the proposed budget was approximately 22 per cent larger than that of the 2026 fiscal year, which was N1.016 trillion, just as he listed some strategic projects that would continue to receive priority attention in 2027, saying they were all at advanced stages of completion.
The projects according to the governor, include the Ekeremor–Agge Road Phase I, Nembe–Brass Road Phase I, Akaba–Ayakoro Road with spur to Otuegwe 1, Glory Drive Phase 3, Agbere-Elemebiri Road, the 30,000-seater stadium at Igbogene, and the nine-storey state secretariat complex.
The governor expressed the conviction that with work progressing on the three senatorial roads, all local government headquarters would be connected to the state capital and boost socio-economic activities across the state.
“With work progressing on all senatorial causeways, we are moving closer to an ambition our people have held since the creation of the state: to connect the capital to every local government headquarters and open up access to our coastal communities. This will boost fisheries, marine and blue economy enterprises, and tourism.
“These projects demonstrate that our beautiful terrain should not limit our ambition. With resolve, sound planning and prudent management, Bayelsa is building what many once thought were impossible”, he added.
Giving a breakdown of the sectoral allocations, Works and Infrastructure got the lion’s share of N422.84 billion followed by Education ¦ 126.97 billion and Sports ¦ 68.50 billion.
Also, Health was allotted ¦ 53.32 billion, Security N24 billion, Public Utilities N22.94 billion and Agriculture got N17.74 billion.
Diri charged the Ministry of Budget and Economic Planning to enforce coordination, transparency and accountability and ensure effective implementation of the budget.
According to him, government would continue to improve its model schools, support accreditation of programmes in tertiary institutions, strengthen science and technical education and introduce digital learning tools in schools.
He added that the administration would pursue the upscaling of its 60 megawatts independent power plant to 100 megawatts and prioritise water provision in 2027.
He also remarked that the allocation to the sports sector would enable government accelerate work on the stadium project as the state prepares to host the National Sports Festival.
In his remarks, Deputy Speaker of the House of Assembly, Rt. Hon. Michael Ogbere, commended Governor Diri for the successful implementation of the 2026 budget, and appreciated him for his visionary leadership.
Hon. Ogbere described Diri as a peace maker, bridge builder and a leader who has constructed roads and bridges across 80% of all communities in the state, expressing confidence that the projects outlined were achievable.
The Deputy Speaker assured the governor of the 7th Assembly’s support and speedy passage of the budget while the Majority Leader, Rt. Hon. Monday Bubou, moved a motion for the members to pass a vote of confidence on Governor Diri and the administration, which was unanimously endorsed by the lawmakers.

Ariwera Ibibo-Howells, Yenagoa

Business

NNPC Targets Two Million Bpd Productions In 2027

Published

18 hours ago

November 6, 2026

The Tide

The Nigerian National Petroleum Company Limited (NNPC) has said that ongoing reforms in Nigeria’s oil and gas sector have lifted national crude oil production by 600,000 barrels per day, from about 1.2 million barrels per day to 1.8 million barrels per day.
According to the company, the improvement has strengthened Nigeria’s position as a destination for international energy investment.
Group Chief Executive Officer ( GCEO) of NNPC Limited, Engr. Bashir Bayo Ojulari, made the remarks last week at an Energy Talk titled “Nigeria’s Reform Agenda: Competing for Energy Capital”, moderated by John Defterios, Chairman, MENA, APCO, at the 2026 Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) in Abu Dhabi, United Arab Emirates.
Ojulari linked the production growth to the implementation of the Petroleum Industry Act (PIA) 2021, an improved investment climate, better investment decisions, and stronger collaboration between NNPC Limited and its partners.
He said the current output level is a milestone in NNPC Limited’s journey towards its 2 million barrels per day target by 2027.
The Company, he explained, is focused on maintaining infrastructure, protecting base production, increasing output from existing assets, and advancing new projects designed to lift production further.
“The figure of 1.8 million barrels per day is a stage in a journey towards our objective.
We are concentrating on the basics, which are maintaining our infrastructure, protecting base operations and executing the projects that will take production higher,” Ojulari stated.
On the domestic market, the GCEO said the removal of petrol subsidy has been accompanied by an expanded Compressed Natural Gas (CNG) programme.
He noted that over 400 CNG conversion centres have been established, while more than 1,000 trucks are transporting petroleum products

Nkpemenyie Mcdominic, Lagos

Business

SEREC Demands Independent Forensic Audit Of NIMASA CVFF Funds

Published

18 hours ago

November 6, 2026

The Tide

The Sea Empowerment and Research Centre (SEREC) has call for an independent forensic audit of the Nigerian Maritime Administration and Safety Agency (NIMASA), following conflicting claims over the management and currency status of the Cabotage Vessel Financing Fund (CVFF).
The centre said the controversy surrounding the fund had reinforced its earlier concerns about transparency, accountability and the possible erosion of contributions through currency conversion and administrative decisions.
In a reaction titled, “Cocks Crow at Dawn — On the CVFF Audit Crisis,” forwarded by SEREC’s representative, Eugene Nweke, the organisation said the latest revelations had vindicated its earlier calls for a comprehensive examination of NIMASA’s accounts from 2004 to date.
SEREC said former NIMASA Director-General, Temisan Omatseye, had disclosed that dollar-denominated contributions were converted into naira and invested in fixed deposits during his tenure, while the incumbent Director-General, Dr Dayo Mobereola, maintained that the fund remained in dollars with the Central Bank of Nigeria.
The organisation said the conflicting accounts raised questions about the actual value, location and management of the fund, which was to provide financing support established for indigenous shipowners under the Coastal and Inland Shipping (Cabotage) Act.
It argued that shipowners, as contributors to the fund, deserved documentary evidence showing how much had accrued, where the money was domiciled, the interest generated and the amount currently available for disbursement.
SEREC also warned that converting dollar contributions into naira exposed the fund to significant foreign exchange losses, given the depreciation of the local currency over the years.
According to the organisation, if the contributions were converted into naira and retained in that currency, the fund could have suffered a substantial erosion in its real value, undermining its original objective of strengthening indigenous shipping capacity.
It maintained that the CVFF was contributors’ money and should not be treated as government largesse, stressing that shipowners had a legitimate right to demand accountability.
The centre further criticised maritime industry stakeholders, particularly shipowners’ associations, for allegedly prioritising access to the fund over sustained demands for transparency in its management.
SEREC insisted that no disbursement should take place without a comprehensive forensic audit to establish the fund’s financial history and current position.
It said the audit should cover all contributions, currency conversions, investments, accrued interest and administrative transactions relating to the fund from 2004 to date.
The organisation said the findings would provide the necessary clarity on the financial position of the CVFF and help restore confidence among indigenous shipowners seeking access to the facility.

Nkpemenyie Mcdominic, Lagos