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IMPACT OF CORRUPTION ON FISCAL POLICY MANAGEMENT IN NIGERIA

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CHAPTER ONE

INTRODUCTION

  • BACKGROUND OF THE STUDY

Corruption is one of the greatest challenges of the contemporary world today. Literarily, corruption connotes an anti-social behaviour conferring improper benefits contrary to legal and moral norms, which undermine the authorities to improve the living conditions of the people (Osaba, 1996; Tanzi, 1998; Folorunso, 2007).  To the developing countries, the prevalence of corruption vary from country to country. In Nigeria precisely, corruption has posed serious danger to both the micro household and the economy as a whole. It has undermined good government, distorted public policy, harmed the private sector, hampared public sector development and have particularly hurt the poor (Transparency International; 2008). Farida, (2010) in Obasanjo ,(2010:2) put it that corruption is the greatest single bane for our society today. According to Alemika, (2004), corruption is a serious problem in Nigeria today as it is increasingly widespreading and unfortunately being tolerated by the public.

Corruption in Nigeria seems to have acquired immunity against various political and legal measures aimed at its control. Since independence in 1960, successive administrations have been enmeshed in crises of confidence ochastrated by corruption as reflected in the processes of policy formulation and implementation. In the first republic, corruption was kept at manageable level. Cases of corruption during this period were sometimes clouded by political fighting. The trend has for long changed as the evil wind has permiated into all the facets of the Nigerian economy and mostly the fiscal policy environment.

Conventionally, fiscal policy has been associated with the use of taxation and public expenditure to influence the level of economic activities (Okoro, 2009:340). It is an economic measure which involves the deliberate use of government spending and taxes to achieve macroeconomic growth. The implementation of fiscal policy is essentially routed in the government budgets. The budget is therefore more than a plan for administering the government sector. It rather reflects and shapes a country economic life. The first recorded corruption in fiscal policy management in Nigeria can be traced back to the pre-independence period when in 1944, a firm belonging to Azikiwe and family bought the African Continental Bank in Lagos (Uche, 1997:57).  A report wrote that most of the paid-up capital of the African Continental Bank were fund diversion from the Eastern Regional Financial Corporation (Chuta, 2004). During the first republic (1960 – 1966), some political office holders were noted for undisguised personal enrichment.  Some of the ministers then did not pretend on how they made their ill-gotten gains.

During a certain civilian regime, the sum of N200 Million supplementary allocations to a state government meant for the payment of salary arrears disappeared. Chuta, (2004:27) lends credence to this where he says that corruption had become so pervasive, and may have been given official recognition to the extent that the disappearance of the sum of N 200 Million as supplementary allocation to a state government, for the payment of overdue salaries was dismissed simply as owing to “change of hand”.  Corruption has pre occupied and confounded the minds of Nigerians for decades. Magbadelo, (2006:2) states that ever since Nigeria’s first republic collapsed in July 1966 amid allegations of massive corruption, the fight against corruption have developed into an important public policy issue.

1.2       STATEMENT OF THE PROBLEM

The increasing wave of corruption and its devastating impact on national economies have become a global problem so much so that some World Bank researchers have embarked on the study of this problem in some developed countries of the world.  Hence, the current researcher’s interest is to do a similar research here in Nigeria to find out the extent to which corruption in the fiscal policy management can affect government expenditure, deficit financing and tax revenue.

The choice to study the impact of corruption on fiscal policy management as measured from the stand point of government expenditure as well as deficit financing is predicated on the fact that the incidence of corruption is frequently reported in these areas in Nigeria.  Also, the researcher became interested in this topic because corruption in fiscal policy management seems to reduce the funds budgeted to be spent on the basic needs. There are a lot of reported cases of abandoned projects.  Again there is low contribution of tax revenue to the government revenue.  All these situations compelled the researcher to investigate the extent to which corruption affects fiscal policy management.

Besides, the recent wave of corrupt practices noticed amongst the political office holders in Nigeria has had a negative impact on the people of the country.  These corrupt practices are written in our dailies and are always reported on the television or sometimes we hear of them through radio announcements.  Hence, the researcher resolved to find out, through a thorough investigative research, the actual impact of corruption on the fiscal policy management in Nigeria.

1.3       OBJECTIVES OF THE STUDY

Generally, this research is set to evaluate the impact of corruption on fiscal policy management in Nigeria. Consistent with the above statement of problem, the study will specifically achieve the following three cardinal objectives:

  1. To determine the impact of corruption on aggregate expenditure in Nigeria.
  2. To examine the impact of corruption on deficit financing in Nigeria
  3. To evaluate the impact of corruption on tax revenue in Nigeria

 

  • RESEARCH QUESTIONS

Based on the above research problem and the objectives of the study, this research will seek answers to the following questions:

  1. To what extent does corruption affect government overall expenditure?
  2. To what extent does corruption affect deficit financing in Nigeria?

 

  1. To what extent does corruption affect tax revenue of the government in Nigeria?

 

  • RESEARCH HYPOTHESE

Arising from the statement of problem, the research objectives, and the research questions, the following null hypotheses were formulated as a guide for the study:

HO:      Corruption does not have any significant positive effect on government overall expenditure

HO:      Corruption does not have any significant positive effect on deficit financing in Nigeria

HO:      There is no significant positive impact of corruption on tax revenue in Nigeria.

  • SIGNIFICANCE OF THE STUDY

This study will be of immense benefits to several groups of people including the government, business organizations and in the academics. Amongst these personages, their benefits shall be in diverse ways such as:

Government: The result of this study will help the Nigeria government to improve on the implementation of fiscal policy in Nigeria.  The product of this research work will serve as a guide on budgetary allocations as well as implementation to the relevant sectors of the Nigeria economy.  It will enhance the management of budgetary allocations to ensure that the budgeted amounts are really spent as planned.

Policy Watchers and Analyst: The outcome of this research is also expected to be of significance to policy watchers and analyst. This group of people will utilize the platform of this study in their analysis on corruption and fiscal policy performance in Nigeria.

Public: Similarly, the general public, through the findings of this research, will be better informed on the level, nature and impacts of corruption on the Nigerian economy. Such insight will enable the public understand the need for them to partner with the government to fight corruption to the barest minimum.

Academics: Academically, this study will contribute to the enrichment of literature on corruption in the public sector. It will empirically establish the significant impact of corruption on fiscal policy performance. The study is expected to provide important information to guide future researchers.

  • SCOPE OF THE STUDY

This study focuses on the impact of corruption on fiscal policy management in Nigeria. Accordingly, the study evaluates corruption as it affects government expenditure, deficit financing and tax revenue respectively. The research is a twelve (12) year study which captures the time-frame 2000-2011. This period is justified as it encapsulates the new transition era and the journey so far in the Nigeria democracy.

  • LIMITATIONS OF THE STUDY:-

One major limitation of this study is data generation. Getting statistical quantitative data on corruption covering 12 years period is expected to pose some challenges. This is because, Nigerians at the moment have poor attitude towards data documentation and preservation.

Another major limitation is the paucity of substantial local literature on corruption and fiscal policy performance. This is also expected to affect the quality of this work. The reason is because, although the study is meant to close a local gap, foreign theoretical and empirical studies made up the bulk of data used in the

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