Business
Public Procurement Corruption: Casuses, Remedies (2)
This is the second part of the paper first published Monday 4th January, 2010.
According to Vito Tanzi, “The total economic and social effects of corrupt actions might be very costly and out of proportion to the bribes received by corrupt officials in terms of resources wasted, the opportunity cost of resources· misused, and the inefficiencies introduced in the system.”
To illustrate the economic impact of rent seeking and corruption with an example, imagine that a highway is to be built, a N500 million project. Ten companies take part in the tender. A modest suggestion is that five companies each pay N500,000 in various types of grease payments to win the contract, while the winner also pays 10% of the contract value, N50 million. The apparent effect is that $52,500,000 is wasted. Besides, the bribe paid by the contractor most probably inflates the highway price, or makes the company skimp on quality. The other four bribing companies also have to regain their sunk cost, for instance by increasing prices on other products offered by the company, contributing to higher domestic inflation. Macroeconomic effects are obvious if this example portrays e.g. ten percent of the public acquisitions in a country. This percentage is most likely higher in countries experiencing extensive corruption.
Corruption, “state capture” and transition economies
A different side of bureaucratic rent seeking is state capture, defined as the propensity of firms to shape the underlying rules of the game (Le. laws, decrees and regulations) through illicit and non-transparent private payments to public officials (Hellman et aI., 2000a). State capture evolves as a result of grand corruption. Key state institutions are “captured” by private interests to bias the policy-making process in favor of particular firms, leaving the operation of government non-transparent. The underlying threat to democracy is obvious when elected politicians and public officials make decisions on grounds deviating from the expected.
Impaired competition, abated international interest and firm behavior
“Systematic corruption can induce inefficiencies that reduce competitiveness. It may limit the number of bidders, favor those with inside connections rather than the most efficient candidates, limit the information available to participants and introduce added transaction costs” (UNDP, 1997). These distortions of market forces obstruct the ordinary benefits induced by competition, like the achievement of best value for money, a rational allocation of resources, and the pressure experienced by individuals and companies for general improvement. Usually, a public tender affected by corruption represents an inefficient investment of public assets. One reason is inflated prices; another is that a corrupt official who discriminates in favor of some bidders frequently selects an inefficient contractor (lien, 1990; Rose-Ackerman, 1978).
A pervasive level of corruption in the economy may also abate the international interest in both trade and foreign direct investment (Wei, 1997 and 1999), resulting in a GDP growth lower than it could have been and a reduction of qualified competitors in procurement projects. Corruption represents an increase of trade or investment expenditures to a foreign enterprise. When demands for bribes also appear unpredictable, counting on the necessary profit is difficult.
Predictable corruption, however, may not necessarily be less harmful than unpredictable corruption. Lambsdorff argues that confidence in corrupt deals enhances the further spread of corruption. “When business people have confidence that after paying a bribe a return will be provided as promised, there is less motivation to seek legal alternatives” (Lambsdorff, 2001). The uncertainty with regard to costs may thus cause the enterprise to turn the tender in question down. Besides, operating in a situation with informal rules is difficult as the company may not understand how to behave and react, who to bribe (and not to bribe), what contact to grease, etc., explaining a certain refusal to approach the economy. Companies may also decline tenders likely to be affected by corruption because of legal restrictions on bribery of foreign public officials.
The companies defying all these challenges, on the other hand, experiencing successful trade or investment in the economy despite high levels of corruption, often exhibit a more lenient attitude towards bribery. Furthermore, UNDP (1997) explains how the uncertainties introduced by corruption into the economic environment may affect the way private firms do business. The firm may take up a short-run orientation, fearing either that those in power may overthrow because of their corruption, or the imposition of arbitrary financial demands once investments are sunk. The consequence may be a reluctance to invest in stationary capital and a too hasty project completion ignoring quality demands.
Of course, these problems are not characterizing all companies. To some degree, however, the attitude towards bribery and the effect on firm behavior may cause an adverse selection of foreign companies operating in the economy, companies whose success rests on bribery. Such an adverse selection of companies would ensure a constant flow of illegal payments to public officials, and restrict the efficiency of anti-corruption measures.
GOOD PRACTICES IN PUBLIC PROCUREMENT
The fight against corruption must start with an explicit commitment by the prime leadership of the country. Ending the pettier forms of corruption in the bureaucracy is difficult if the grand political corruption persists. An honest intention has to be followed up by good behavior, expressing opposition against all forms of corruption, whether it involves family members and friends, political associates, or other members of government.
Policy Response
Policy makers can respond to risks of corruption in general by ensuring a good public procurement system. A good public procurement system that can effectively prevent corruption needs to be transparent and provide for accountability and integrity. The system should also confirm to and cover various procedures, laws and processes put in place for detecting and preventing corruption.
(To be Continued).
Seun Adebowale
Two universities in the Niger Delta zone (University of Port Harcourt and University of Benin) have emerged winners of the South-South region in the Nigerian Engineering Olympiad (NEO) competition.
The NEO competition which took place at the Nigerian Content Tower(NCT), headquarters of the Nigerian Content Development and Monitoring Board(NCDMB) in Yenagoa, Bayelsa State is a nationwide engineering, innovation and entrepreneurship competition launched in 2025 by a non-profit organization, ‘Enactus Nigeria’, in partnership with NCDMB, Renaissance Africa Energy Company Limited, First Exploration & Petroleum Development Company and the Nigerian Society of Engineers (NSE).
The two Universities teams represented differently by ‘Inovation team PROTRONICS’ and ‘Innovation team VHORDE’, won their counterparts from the Igbinedion University, Okada, Edo State, Federal University of Petroleum Resources (FUPRE), Effurun, Delta State, and the University of Uyo, Uyo, Akwa Ibom State, in the competition showcasing hardware and software prototypes developed to serve as innovative solutions to real-world challenges with specific reference to Nigeria and Africa.
From UNIPORT’s ‘team PROTRONICS’ was an innovation called ‘KEYTRIC’ which the competitors presented as a ‘SMART POWER CONTROL’ that makes electricity usage effortless and automating with the use of an intelligent locking systems.
Team PROTRONICS highlighted high electricity bills, electricity fire risk and expensive smart home and gaps in existing solutions, including costly installation, lack of integration between security and energy, and dependence on the Internet as the reason for their innovative invention.
“Our innovative solution is a smart energy door lock that switches off a user’s electricity supply when they lock to leave the house.
“Our solution saves money on electricity bill, reduces the risk of electric fire accident, and is affordable to everyone”, the Uniport’s team said.
On the other hand, Team VHORDE of the University of Benin presented what it terms Intelligent Real-time Interface(IRIS) which enables visually impaired individuals to gain sight.
They pointed out that there are 4.5 million visually impaired Nigerians who are in some way incapacitated and unable to live life to the fullest.
The students displayed an IRIS pack, consisting sensors, wearable glasses, microphone, camera and Haptic feedback.
On how the IRIS works, the UNIBEN students said the smart glasses, which consist, a camera, depth sensor, and edge Artificial Intelligence(AI) processor, enables a visually impaired person to see and understand the world in real time.
“There’s an AI Compute Unit to be worn at the waist, which runs Convolutional neutral network (CNN) object detection, face recognition, and voice processing on-device”, the team said.
In a section on Business Model and Revenue Streams, the University of Benin competitors indicated production-scale pricing for IRIS Standard as N699,000 one-time purchase.
According to the team, the IRIS standard has the following functions, real-time object and scene identification, familiar face recognition, obstacle and hazard detection (haptic wristbands), natural voice interaction, Edge AI – fully offline core functions, and OTA software updates via Wi-Fi.
In an assessment of the prototypes and demonstrations made, one of the key judges of the competition, Engr. Dokubo Obongo, Manager, Institutional Strengthening, at the NCDMB, described all the presentations as “top-notch”.
He noted that there are solutions that are viable marketwise, relevant to the society and the challenges humans face, explaining that the Engineering Olympiad is a competition targeted at developing home-grown solutions from research and development from Nigerian universities.
“The idea is to see how we can proffer solutions to our own problems which means creating business opportunities”, he said.
Speaking for Enactus Nigeria, the group’s Country Director, Mr. Michael Ajayi, said the two top finalists from the six geopolitical zones would move to a boot camp for further preparation towards the main national championship, and that the best three teams would share N100 million.
He also disclosed that each of the 30 teams that displayed prototype technology in the regional competition would receive N3 million.
Team PROTRONICS of the University of Port Harcourt had as Team Lead Dr. Victor Jinn (Faculty Adviser), while the contestants were Chukwuma Sunday-Odu, Fubara David Otokini, and Ekemini Godwin Akpan, while Team VHORDE of the University of Benin had Anoint Oritsetimeyin Igorki, Oghosa Derick Osarobo, Uti Henry Eworitsewarami, Jada O. Godfrey-Ariavie, Richard O.Enegbuna, Momodu O. Olayemi, and Asemota G. Ayevbosa.
By: Ariwera Ibibo-Howells, Yenagoa
The Nigeria Customs Service (NCS) has officially unveiled the Simplified Customs Advanced Declaration System (SCADS) at the international wing of the Nnamdi Azikiwe International Airport, Abuja.
The move is aimed at improving passenger clearance, compliance and customs operations.
This was contained in a statement by the NCS spokesperson, Abdullahi Maiwada, and made available to Newsmen in Abuja.
Maiwada explained that the platform, designed to simplify baggage declaration for inbound international passengers, aims to reduce manual bottlenecks, improve transparency in revenue assessment and enhance operational efficiency at Nigeria’s international airports.
Speaking at the inauguration ceremony, Deputy Comptroller-General of Customs in charge of ICT/Modernisation, Oluyomi Adebakin, said the deployment of SCADS marked another major step in the service’s digital transformation agenda.
Adebakin said the initiative became necessary to address operational challenges encountered on the service’s previous passenger declaration platform earlier this year.
She explained that rather than allowing the setbacks to slow operations, the service chose to develop a stronger and more efficient alternative.
“When the earlier platform experienced operational challenges, we chose not to see it as a setback.
“We saw it as an opportunity to build something better, stronger and more efficient,” she said.
According to her, the newly introduced SCADS platform allows passengers to declare items before arrival, thereby reducing clearance time while improving compliance and operational integrity.
“For passengers, this system creates the opportunity for advance declaration before arrival. It means faster clearance, easier compliance and smoother movement through our airports,” she added.
Adebakin said that the system would eliminate subjective revenue assessment by ensuring that duties were being automatically generated based on declared items, their quantities and actual values.
“When we talk about revenue collection, it is not about collecting more or less. It is about collecting the right revenue. With this system, assessment will now be more objective, accurate and driven by data,” she said.
Earlier Comptroller Customs Area Controller, FCT Area Command, Victoria Alibo,described the selection of the command for the pilot phase as a vote of confidence in its operational capacity.
Alibo said the new platform integrates passenger baggage and e-commerce declarations into a single digital framework designed to support global Customs best practices.
“SCADS is designed to simplify declarations, reduce clearance time, eliminate manual bottlenecks and align our operations with international standards,” Alibo said.
She said that the pilot phase would run for five days, from May 18 to May 22, during which officers would evaluate the system in a live environment ahead of nationwide deployment.
The event was attended by senior Customs officers, officials of the Federal Airports Authority of Nigeria, partner government agencies, technical teams, and other key stakeholders in Nigeria’s aviation and border management ecosystem.
By: CHINEDU WOSU
Olubiyo, said this in an interview with Newsmen to Monday in Abuja.
He said energy theft occurs at both the consumer and institutional levels across the electricity value chain from generation to transmission and distribution.
According to Olubiyo, at the consumer level electricity theft includes metre bypass, illegal connections and unauthorised access to power without proper billing.
According to him, some customers would dig underground cables directly to their homes or businesses without being metered, while others exploit estimated billing systems to consume electricity without payment.
“Whether through metre bypass or illegal connection, many customers are using electricity for free. That is energy theft,” he said.
He also alleged that institutional energy theft exists within the power sector, particularly through defective, obsolete, or wrongly installed metres used in monitoring electricity generation and distribution.
He said that wholesale metres installed at critical interfaces among generation companies (GenCos), transmission companies, and distribution companies (DisCos) were often out-dated or improperly configured.
He said those could lead to inaccurate readings and inflated subsidy claims.
“If 4,000 megawatts is generated and 7,000 megawatts is recorded, that is energy theft because the excess energy does not get to consumers,” he stated.
The expert further said some operators in the sector allegedly exploit maintenance and repair contracts through inflated contract sums and possible collaboration with vandals.
He also cited the deployment of secure pole-mounted metres in military barracks as an example of how technology can curb metre tampering and unauthorised access.
He, therefore said the sector had to urgently address infrastructure decay, weak regulation, poor investment, and corruption within the value chain.
Otherwise, according to him, Nigeria’s electricity industry will continue to face liquidity challenges, revenue losses and unstable power supply.
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