A large part of my time this last weekend was spent travelling to Kenya where I made a presentation on the ill-effects of corruption in Nigeria and how the introduction of subsidies by different governments on the continent has proved to be nothing but opportunities for corruption to grow and fester. The trip from Abuja to Nairobi, via Addis Ababa, was not without its sideshow as I was delayed and questioned for hours at the Jomo Kenyatta International Airport by officials of Kenya Immigration Service. As a frequent traveller with multiple visas on my passport, and evidence of previous entries into Kenya, the line of questioning by the immigration personnel betrayed a lack of respect for the friendly relations between Nigeria and Kenya. Immigration issues and the need for true economic integration in Africa will be the focus of this column in the near future.
Corruption thrives on the African continent, perhaps much more than anywhere else in the globe. An argument could be made for this being more of a perception problem than the reality, but the statistics are there for all to see. According to the United Nations Economic Commission for Africa, the continent loses more than $50 billion every year to corruption and illicit financial outflows. Annual reports from global corruption rating agency, Transparency International, show that Africa consistently dominates the list of most corrupt countries in the world. Perhaps, the greatest diplomatic indictment of corruption in Africa came in the wake of British Prime Minister, David Cameron’s reference to Nigeria, Africa’s largest economy, as a “fantastically corrupt country” ahead of the Anti-Corruption Conference in London in May. This is not an article on Cameron’s hypocrisy, so let’s pretend he has no associations whatsoever with the Panama Papers.
While arguments exist on the true extent of corruption in Africa, and whether countries in Europe, Asia and America are not just as equally corrupt, there is no debate about the severity of the effects of corruption on the human development index in Africa compared to the rest of the world. Ultimately, the wages of corruption in Africa is death. Not death for the perpetrators of corruption and their benefactors, but for the millions impoverished as a result of the greed of a few. As far as the heaven is from the earth, so are the developmental priorities of Africa from most of the rest of the world we may be tempted to use to establish the lack of monopoly in the existence and practice of corruption. As a result, the opportunity cost of corruption on the continent is far higher, as high as the value of life.
Popular social commentator and columnist for African Liberty, Bukola Ogunyemi, who co-presented with me at the 3rd African Students For Liberty East African Regional Conference in Nairobi, defined subsidies as unwholesome interventions of governments in free market operations which ultimately open up multiple touch points for corruption that ends up hurting the masses more in the end than the non-existence of such subsidies. According to him, subsidies, in the form and manner they are presented in African economies, exist as a result of government’s inability to proffer and implement innovative solutions to developmental issues. As a result, heavily subsidised economies are often accompanied by the absence of structures that would make the discontinuance of handouts by governments impossible.
My presentation in Nairobi drew heavily on Nigeria and the fuel subsidy scams as an example of how corruption trails the introduction of subsidies on consumption rather than production. Fuel subsidy was first introduced in Nigeria when the country could no longer meet the demands for refined petroleum and had to start importing. Initially, the subsidy regime was billed to last for six months while work continued on increasing the total production capacity of Nigeria’s four refineries. That never happened. And as Nigeria grew, so did demand for fuel and the price of bringing products in from refineries in Europe increased. Thus began a cycle that saw successive governments introduce higher subsidies to keep fuel price “affordable” for the masses. That particular journey led to the loss of more than N5tn, most of it to corruption, without any problems solved.
Examples abound of how corruption has proved to be the twin of subsidies in other African countries. The fertiliser subsidy scam in Malawi, the bread subsidy scam in Egypt, the agriculture subsidy scam in Tanzania and several other instances of government opting for a cosmetic makeover approach in the form of subsidies rather than create avenues for businesses to run smoothly and opportunities for the masses to create wealth and be able to afford the basic pleasures of life.
A form of subsidy that is seldom seen as one and which I failed to mention in my presentation is in currency control. For 15 months, the Nigerian government pegged the official exchange rate of the naira at 197 – 199 per dollar even when market forces suggested a different valuation. Essentially, government was subsidising the exchange rate to make the economy look stronger, at least on paper. But as it is with every other form of subsidy, the scheme benefited only the cronies who already enjoy all forms of tax breaks and pioneer status. The common man for months made forex transactions on the parallel market at between 300 and 350 per dollar.
So far, 2016 has shown in Nigeria what is possible when government shifts focus to confronting and solving perennial problems of development, rather than creating subsidies which enrich only a few. With kerosene and petrol subsidies gone, and more recently currency subsidy gone with the floating of the naira, Nigeria’s economy is gradually embarking on a journey of recovery to freer and more competitive markets and more equitable distribution of wealth.
Subsidies exist in other economies outside of Africa, but these are mostly for production and only after the establishment of strong systems and institutions that reduce abuse of such schemes to the barest minimum. Sudden and arbitrary removal of subsidies therefore might not be the solution to the corruption entrenched in the system. Instead governments across Africa should plan to gradually phase out subsidising consumption while stimulating the economy through policies that would see as many people lifted out of poverty as possible.
This may sound like rocket science but in a world where poor countries like North Korea now toy with rockets, even rocket science is not so hard to replicate. A line from King’s College, Lagos’ old song reads, “Others went before you and attained the light, where they wait to cheer you, victors in the fight,” and this aptly applies to most of Africa as it relates to learning from most of the countries topping the Economic Freedom Index. These countries are prosperous because of many reasons but top of that is because their economies are sophisticated, economic freedom is the norm rather than the exception and the rule of law applies to all men and women, mostly equally. The African economies that pursue the path of economic liberalisation are bound to thrive and outshine those who insist on playing the new game of the global economy with the same old rules that have since failed the African people.
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