Global Poverty Research Group

Has Nigeria's anti-corruption strategy failed?

By John Toye*

One of the five research themes of the GPRG is how to improve governance in Africa. Official corruption has a widespread and insidious effect on the effectiveness of government, and on the welfare of citizens who rely on government services. It is very important to understand the factors that sustain official corruption and to finds ways to reduce it.

In this context, it is noteworthy that on April 4th 2005, Nigeria’s President Obasanjo sacked Housing Minister Mobolaji Osomo for offering to sell 207 official properties worth more than $100m to senior figures from the government, military and other areas of public life. President Obasanjo is trying to persuade Western creditors that his anti-corruption stance is robust and that Nigeria merits further debt relief. However, this incident is in danger of undermining the credibility of his crucial anti-corruption policy of monetising civil servants’ remuneration.

Bureaucracy: the Colonial Legacy

The typical existing form of contract between an African government and its civil servants is a legacy of colonialism. Decolonisation involved the transfer to new African rulers of small bureaucracies that were still largely staffed by expatriates of the colonial countries. When local staff then rapidly replaced the expatriates, the pre-existing structure of public sector pay and compensation was retained virtually unchanged – in both British and French ex-colonies. Independent governments continued to provide housing for local civil servants above certain grades, just as the colonial government had done for expatriates, despite the different circumstances of locally based staff. The continued provision of government housing for local staff, anomalous and unnecessary, reflected the need of the successor administrations to demonstrate their equality in every respect with the colonisers whom they replaced.

Housing provision was only one element in the compensation contract for colonial officials. This package also contained, as well as a salary scale and a pension related to final salary and years of service, a variety of other allowances for clothing, transport and field visits, all of which were regarded as necessary for efficient job performance. Thus higher-level officials usually had a rent-free fully furnished house, access to an official car, free electricity, water and telephone, and the wages of two domestic servants.

Since decolonisation, social pressures have led to an excessive expansion of the small colonial bureaucracies. While employment in the public service has multiplied several times over, the average wage, calculated in real terms, has dropped by over half in Nigeria, Tanzania, Sudan, Ghana, Uganda and Guinea, among many others. The deeply entrenched expectation that a tertiary educational qualification should automatically entitle the holder to a government job was never confronted, but rather appeased. Aid donors have responded to perceived bureaucratic failures by funding a heavy flow of technical assistance, establishing new government units designed to solve specific problems, but neglecting their ultimate financial sustainability.

Consequences: the Incentive for Corruption

Over-expansion of government employment plus a tightening of budgetary resources have had an asymmetric impact on the different components of the civil service compensation package. Civil service salaries and pensions have been up-rated in nominal terms dramatically less than would be necessary to keep pace with inflation. By the same token, the small deduction from salary (if any) made in respect of housing has also fallen well behind inflation. But the cost of housing services has risen with inflation, so that the value of subsidised housing has grown greatly in relative terms as a component of the compensation contract. Allowances for transport and visits out of station also have had to be up-rated more generously than salary and pension increases.

These long-term distortions of the compensation contract have had the effect of greatly increasing incentives for bureaucratic corruption. They have been particularly damaging at the highest levels of the bureaucracy. In the earlier years of service, civil servants often can secure advancement only by bribing senior officers in charge of promotions. This career investment will have to be recouped. Yet, the higher the promotion ladder is climbed, the greater proportion of compensation comes in the form of housing and other in-kind perquisites, because the money salary differential between a permanent secretary and an office sweeper is extraordinarily compressed, perhaps to as little as two or two-and-a-half times.

The composition of the compensation contract becomes of the utmost significance as the senior official comes up to the age of retirement. In sub-Saharan Africa, senior civil servants survive on the perquisites of office. However, after retirement, the house, car, servants and free utilities will all be taken away, and the only means of subsistence will be a pension that will be calculated in relation to a grossly eroded salary. This is a huge incentive to behave opportunistically and increase their income by corrupt methods. Moreover, the post-retirement financial problem becomes most pressing for officials at exactly the moment when their opportunity for corrupt enrichment is at its peak. Senior officials who alone can be the guardians and guarantors of the probity of the entire service are also those most tempted to betray it. Because of the perverse incentives of their compensation contract, they are put under massive and unnecessary pressure to betray their service from above, causing a ripple effect down through the junior ranks.

Monetisation of rewards in Nigeria

Nigeria’s monetisation policy is a courageous recognition of this problem, and an attempt to address it. The policy is to remove official perquisites, including rent-free housing, and to make good the loss with monetary compensation. The overall strategy is right, but good strategies can be undermined by bad implementation – and especially by corrupt implementation.

One could argue that the government should simply transfer the legal ownership of all government housing to the existing occupiers. That would remove post-retirement uncertainty, and hence the incentive to corruption, from the current generation of high office holders, while at the same time compensating them for the deep erosion of their pensions. Such a policy would thus serve both efficiency and equity. The difficulty that would arise from this policy would be financing the salary increases that would be needed to attract the new recruits who would thereafter have to be able to pay for their own living accommodation.

In Nigeria, the Housing Minister decided that official properties should be sold, but that sitting tenants should have first refusal of a non-transparent offer of sale. It is this, and the revelation of the names of the intended beneficiaries that has caused the scandal.

The government probably needs to adopt a more phased policy of charging for services now provided free and adjusting salaries upward in line with the charges. This should be accompanied with more vigorous efforts at retrenching numbers, because this is the main constraint on raising salary levels.

Conclusion

Nigeria’s monetisation policy is an important strategy for tackling a long-standing cause of corruption that has bedevilled many sub-Saharan African countries. The current scandal surrounding its implementation will necessarily cause short-term embarrassment to the government’s search for debt relief, but donors should not do anything to de-rail the basic strategy. Rather, they should suggest alternative implementation approaches.


* The views expressed are those of the author(s) and do not necessarily represent those of the Global Poverty Research Group, Oxford University, or the Economic and Social Research Council

July 26, 2005 16:18