Corruption Risk Mapping in Nigeria

In response to the pervasive challenge of corruption in Nigeria’s business and regulatory environment, the Centre for International Private Enterprise (CIPE) commissioned a study that maps the patterns and norms associated with the risk of corruption in key business and commercial sectors. The findings of this study contribute a unique perspective to the body of work on studying and analyzing the perception and occurrence of corruption in various forms because of our focus on the norms and opportunities for corrupt conduct in the selected sectors. This report can be used by stakeholders in the private and public sectors, business membership organizations, and civil society in designing and developing appropriate and responsive programs, strategies, and plans to mitigate these risks effectively.

The study focuses on the commercial and regulatory environments in five sectors selected because of their high growth potential and attractiveness for investment. They include:

1. Fast-Moving Consumer Goods (FMCG)
2. Agribusiness
3. Construction
4. Mining & Quarrying
5. Information and Communication Technology

The study uses a three-pronged methodology, including desk research, qualitative analysis through focus group discussions and key informant interviews, and quantitative surveys. While conducting the primary research, interviewers deliberately avoided explicit mention of “corruption,” opting instead to inquire about behaviours and norms related to questionable practices in order to foster candid responses.

Findings highlighted the intricate nature of corruption, affecting various aspects of Nigeria’s business landscape. Corruption risks ranged from bureaucratic hurdles and bribery to nepotism and favouritism that hinder fair competition and impede economic progress. Regulatory challenges, including difficulties in accessing information and compliance issues, compounded these risks, particularly for Micro, Small, and Medium Enterprises (MSMEs). The key insights from the study include:

• The study identifies challenges in the private sector, indicating that strong relationships with suppliers and regulatory authorities are seen as crucial for business success, potentially leading to susceptibility to corrupt practices.
• Access to information is crucial for regulatory compliance, but hoarding information by regulators can contribute to corruption by allowing individuals in authority to exploit their control over information for personal gain.
• Personal relationships heavily influence contracting and hiring decisions in various sectors, leading to favouritism, nepotism, and cronyism, which undermines professionalism and fairness.
• There’s a correlation between the perceived fairness of regulatory authorities and the importance of informal networks or relationships for business success, raising questions about the influence of informal relationships on regulatory fairness ratings.
• Gift-giving influences decision-making processes, potentially compromising professionalism and reinforcing a culture of corruption within business and regulatory contexts.
• Bribery is prevalent among MSMEs in Nigeria, with significant proportions reporting experiencing various corrupt practices, indicating systemic corruption within the private sector.
• Many MSMEs engage in corrupt practices regularly, highlighting the entrenched nature of corruption and its substantial financial impact on businesses.
• Despite challenges, stakeholders express confidence in the private sector’s ability to mitigate corruption risks through sector-specific associations and collective action. Mitigation strategies suggested by stakeholders include encouraging civil society oversight, digitizing government services, promoting ethical leadership, instilling patriotic values, creating accessible complaint channels, empowering individuals, and raising public awareness.

Concerted efforts are needed to address corruption risks, and to foster a culture of integrity and accountability within the private sector. Addressing the root causes of corruption and promoting ethical standards can create a conducive business environment that ensures fair competition, fosters sustainable development, and upholds the rule of law. Ultimately, this will contribute to the country’s economic development and prosperity while attracting foreign investments in the private sector.