I read a fascinating book a few years ago. Anyone who has read this book would agree that it’s truly enthralling! The book is titled ‘Freakonomics’. It was authored by two maverick writers: Steven Levitt, an economist, and Stephen Dubner, a journalist. Their mission was to “explore the hidden side of everything”, using the tools of economics. Specifically, they used “incentives”, a well-known concept in economics, and showed, with many real-life examples, that by setting up the right incentive scheme one could fix any problem. According to the authors, “Incentives are the cornerstone of modern life – and understanding them is the key to solving just about any riddle”. Indeed, they went on to put it even more vividly. “An incentive”, they said, “is a bullet, a lever, a key: an often tiny object with astonishing power to change a situation”. In other words, incentives are the sure-fire panacea to any human problem. Whatever the problem, provided the incentive structure is right, it can be fixed!
These insights came to mind recently as I thought about corruption in Nigeria and President Buhari’s efforts to tackle it. My reflection immediately triggered two questions. First, could it be that corruption is so rife in Nigeria because there are no proper incentives to militate against it? And, second, can President Buhari’s personal integrity and toughness alone create the right incentives for tackling corruption in Nigeria? Well, after some thought, my answer to each of these questions is NO. I believe that Nigeria currently lacks the right incentive structure to fight corruption, and that, despite Buhari’s best efforts, unless all elements of incentives – economic, social and moral – are properly aligned, corruption will remain a hydra-headed and cancerous problem in this country.
To be sure, President Buhari has been single-minded in his determination to tackle corruption in Nigeria. His body language and actions leave no one in doubt about his administration’s intentions and doggedness. Of course, Buhari’s decision to probe former President Jonathan’s government is bound to be controversial, and has been dogged by hostile siren noises. But I believe such noises are uncalled for. They are distracting, partisan and self-interested. Assuming – and I say that decidedly because propaganda is as much a weapon in war as in politics – but assuming Jonathan’s government truly bled Nigeria dry through massive corruption, then Buhari has no choice but to probe it and hold culpable individuals in that government accountable.
Let’s be clear. Although this is hardly ever mentioned in any public discourse, the truth is that every president of Nigeria has a constitutional duty to tackle corruption. Section 15(5) of the Constitution says unequivocally that “The State shall abolish all corrupt practices and abuse of power”. Given that every Nigerian president swore to uphold the constitution, why have they failed to “abolish” corruption in Nigeria?
Well, that brings me to the main theme of this piece: the power of incentives. My view is that, apart from the self-interested motivations of Nigerian leaders and their lack of political will to eradicate corruption, the existing legal-institutional-constitutional structure of the polity is not a powerful enough incentive to constrain corrupt practices. Let me explain this through the economics of crime, which corruption certainly is.
In his seminal work, ‘Crime and Punishment: an Economic Approach’, the Nobel Prize-winning economist Gary Becker applied rational choice theory, an economic concept, to the analysis of crime. Becker argued that all criminals are rational calculators, and that they make decision about whether or not to commit a crime on the basis of cost-benefit analysis. First, the potential criminal calculates the expected costs of the crime. The expected costs result from multiplying the probabilities of the crime being detected and of the potential criminal being apprehended and convicted by the monetary value of the legal sanctions (e.g. a fine or a jail term or both) and the value of any non-pecuniary losses he or she might suffer (such as a loss in reputation from being branded a criminal). The potential criminal would then calculate the expected benefits of the crime bymultiplying the probability of success (that is, of either not being caught or, if caught, of getting away with a light fine or jail term or none at all) by the monetary (e.g. the amount of money likely to be stolen) and non-pecuniary (e.g. the social or political status that comes with being rich, albeit from stolen money!) benefits of the crime. According to the Becker model, after such an explicit calculation, the rational criminal will only commit the crime if the expected costs are less than the expected benefits!
Now, if we look at corruption in Nigeria through the prism of the Becker model, it seems to me that it is so endemic because the incentive system encourages rather than discourages it. This means that the expected benefits of engaging in corrupt practices in Nigeria are more than the expected costs. As a result, the rational corrupt individual finds it more rewarding to engage in such practices than to refrain from them. I will come back to this point shortly because it’s central to understanding and tackling corruption in Nigeria. But let me quickly make another important point because we have to look at the issue holistically.
There are structural drivers of corruption in Nigeria that cannot be ignored. These include unemployment, job insecurity and poverty. Tough actions alone cannot solve these problems. We need to tackle corruption induced by such factors through an incentive structure that includes rewards, such as jobs, higher pay, better working conditions, better job security, better promotion prospects etc. This is why the Buhari government’s anti-corruption drives must go hand in hand with job-creation and anti-poverty initiatives, and other changes that make honest public service pay and rewarding. For instance, I applaud the recent promise by the Inspector-General of Police to promote 40,000 policemen, and to give them allowances for feeding, transport etc, because, as he put it, “Corruption (in the rank and file of the police) is borne out of insecurity”.
But the state corruption that is bleeding Nigeria to death is not driven by poverty, but by aggressive greed. And this is where the incentive structure has failed woefully to take account of the Becker model. Everyone keeps saying that corruption is “killing Nigeria”, but how many corrupt practices have been detected? And how many corrupt people have been caught? Recently, Nuhu Ribadu, former chairman of the Economic and Financial Crimes Commission (EFCC), said: “Everything that is wrong about Nigeria has to do with dirty money”, adding that “When I look around, I see a lot of investment done with dirty money”. But, for goodness sake, who are these alleged criminals? It is inconceivable that such a problem would exist in the UK or the US, or that people would be talking about corruption in those countries the way we talk about it in Nigeria, and the US or the UK government, including their media and law enforcement authorities, would know nothing about the alleged culprits. Surely, the fact that corrupt practices are often not detected and their perpetrators not apprehended is a major factor fuelling state corruption in Nigeria.
Even when alleged corrupt individuals are ‘caught’, how many have been convicted and given penalties (a fine or a jail term or both) severe enough to make any future wrongdoer think twice when calculating the potential gains from engaging in a corrupt practice? Instead, what you see are cases dead-ending in courts or being dismissed on technicalities. The accused could also enter into plea bargaining or get light fines or sentences that do not reflect the economic and moral costs of the crime committed. Consequently, people found guilty of corruption end up keeping a lot of the money they stole after the legal sanctions. The literature on criminal price exaction shows that such light-touch approach to penal sanctions doesn’t deter criminal behaviour but rather incentivises it.
But, in truth, there is nowhere in the world that legal sanctions or economic incentives (fines or jail term or both) alone are ever enough to deter corruption or any other crime, precisely because they can never be severe enough to do so! Consequently, economic incentives need to be complemented by social and moral incentives. But social and moral constraints on corruption are extremely weak in Nigeria. Take social incentives first.
In his paper, ‘Those who discourage crime’, the sociologist Marcus Felson stressed the influence of social contacts on criminality. He argued that crime would be reduced in any society where there are effective “intimate handlers” and “guardians”. An intimate handler is someone who has an influence on an offender and can control his or her propensity to offend, and a guardian is someone who is interested in stopping a crime being committed. For instance, when the Sultan of Sokoto recently urged wives of public officers to fight corruption from home, he was acting as a “guardian” appealing to the “intimate handlers” of public officers, their wives. Other intimate handlers of political and public office holders are traditional rulers, professional bodies as well as the social clubs and networks to which they belong. But how effective are these social contacts in tackling corruption in Nigeria? How many Nigerians have been found guilty of corrupt practices but still hold prominent chieftaincy titles and/or honorary doctoral degrees? How many public officers have been given national honours, CON, CFR etc, but don’t deserve them?
Recently, the Appointments Commission of the UK House of Lords rejected the elevation of some former MPs into the upper chamber because they were previously found guilty of fiddling with expenses, and, therefore, were considered “unsuitable to take a seat in the upper chamber”. Even though they paid back the expenses wrongfully claimed, often relatively small amounts, they were still denied elevation to the House of Lords, because their past behaviour would “bring the Lords into disrepute”. Could that happen in Nigeria? Given that a title is the ultimate seduction for most Nigerians, I believe that if those found guilty of corrupt practices are stripped of their chieftaincy titles, honorary doctorate degrees or national honours, or denied these honours in the first place, that would serve as a powerful social incentive against corruption.
Then, what about moral incentives? There are serious problems of subjective perception and internal norms here. How people frame a situation really matters. Do most Nigerians really believe that corruption is a crime or do they see it as sharing the national cake? Why do Nigerians always put pressure on political or public office holders from their state, town or family to do things beyond what their legitimate earnings could allow? Why does the society celebrate people whose sources of wealth are dubious? In the UK, all political office holders and senior public officers have to complete and update a register of interests, showing the sources of all their incomes etc. This is publicly available. Corruption thrives in darkness, only light can expose and stop it!
Now, here is another moral point. If you ask me, I would also say that most Nigerians see corruption as a victimless crime. For most Nigerians, corruption has no identifiable direct victim. It’s not the same thing as stealing someone’s goat or a company’s money. In many countries where people pay taxes, they see public money as taxpayers’ money, and anyone who steals public funds is deemed to have stolen taxpayers’ money, not a light offence! But most Nigerians don’t pay taxes and oil money, which accounts for over 70 percent of the country’s revenues, is seen as no one’s money, hence, in my view, the general public’s phlegmatic attitude to official corruption in Nigeria! Surely, it’s only when people see corruption as a moral wrong that regret, remorse, shame, guilt, embarrassment etc can serve as proper moral constraints or incentives against it.
So, if President Buhari wants to win his government’s war on corruption, he must recognise the need to align the three varieties of incentives. The economic incentives need to be strong enough to deter corruption. But he cannot rely on legal sanctions or, indeed, his personal integrity and toughness alone. He needs to mobilise all strata of the Nigerian society to ensure that the economic incentives are fully complemented by the social and moral incentives. Only through a web of economic, social and moral incentives can Nigeria tackle corruption. Without that, it won’t go away!
Olu Fasan
