Corruption against Small Businesses: Nigeria is Killing its Life Source

Nigeria has long been a country of many faces and many traditions but one thing has remained largely present in the society and that is corruption. It is no surprise, however, given Nigeria’s socio-political history that has largely been a story of coups and wars for resources.

Fast forward to 2019 and resource drag is still a big problem in the Nigerian society. The rich continues to get richer and the poor continues to stay poor. In this article we look at Balogun Market, a case of people “hustling” for their daily bread in the midst of chaos and luck and rewarded with nothing but social lack.

Even the busiest shopping and financial districts in the world are not as crowdy and busy as Balogun Market in Lagos on a typical day. At peak times, the Balogun Market is a flowing sea of people and commodities. The umbrella-shielded stalls and tables give it color and excitement as transactions and deals get closed.

Balogun Market is in many ways a microcosm of Nigeria: a country known globally as a petro-economy, but one that in reality is a country of small business people. Today, some will argue that Nigeria is an oil-dependent country as opposed to an oil-producing nation. Even though Nigerians collectively power almost 50% of Africa’s GDP, it still suffers from major infrastructural setbacks that make doing business elusive.

The Big Blow for Small Businesses

Corruption and mismanagement may seem trivial at the helm of authority but it is actually the poor that bear the brunt. At Balogun Market, small business owners are not only threatened by their lack of infrastructure and resource, but by the local “law enforcers” who are meant to protect them. Day-by-day they are undermined via various forms of extortion by so called police officers, licensing officials, safety inspectors, and even local gang members. The sheer number of programs that are supposed to help small businesses across Nigeria continue to increase, yet no real effect has been felt.

The reason why these interventionist programs fail is because they are designed to fail. With over one billion dollars ($1B) spent between 2014 and 2018 on these kinds of programs – much of it has gone towards sustaining political god-fatherism, embezzlement schemes and creating channels to siphon contract funds. Government agencies spring up every day and get funds and do nothing. These agencies do not only exude corruption and incompetence they have eroded the trust of the populace.

Also, politicians routinely interfere in them, handpicking beneficiaries and steering contracts to their cronies. Even more disturbing, this kind of corruption is self-reinforcing. It undermines the effectiveness and impact of small business programs, increasing the need for assistance, and thus makes it easier for politicians to justify expensive follow-on initiatives.

Programs rarely work

Two such schemes illustrate the scale that this corruption involves:

• In 2013, the Central Bank of Nigeria rolled out a $1.3 billion fund to provide inexpensive loans to small businesses across the country. Less than two years later, however, $236 million had been hastily disbursed from the fund, given out to twenty-four state governors—with few strings attached—on the eve of the 2015 elections. Four years on, none of these states has provided a detailed list of entrepreneurs that received loans under the program. Instead, evidence suggests many governors outright embezzled most or all of the funds.
• Nigeria’s federal legislators earmark over half a billion dollars worth of pork barrel spending—known as constituency projects—annually. Using this mechanism, they have steered $433 million over the last few years to projects—often vaguely labeled as ‘empowerment’—purporting to help small businesses. Legislators handpick which federal entities implement these projects and often even select contract awardees: a clear violation of procurement law. The little-known Border Communities Development Agency (BCDA), led by none other than President Buhari’s son-in-law, is now one of largest conduits for these dubious expenditures.

Nigerian government programs meant to help small businesses are awash with red flags. They have a history of malfeasance and an ineffective track record. Many appear to have lost touch with the very same entrepreneurs they should be helping, like the tireless traders of Balogun Market.

Is there hope for the future?

From all indications, Nigeria is well on its way to becoming the third most populous nation in the world by 2050. This will present a lot of technical and developmental challenges for the country. If Nigeria must move forward it must elect better leaders who are selfless and are more concerned about the common good than their oversized pockets.

To achieve growth and catch up with other parts of the world, Nigerian leaders must address policy missteps that make life and business extremely difficult for business owners across the board. Instead of blindly assigning an endless stream of funds to projects that have no return, Nigerian leaders should take bold steps toward redesigning the way they tackle problems. Although I am quite sure they are not blindly assigning funds.