The PriceWaterhouseCoopers releases a new report stating that corruption will cost Nigeria 30 percent of its GDP by 2030
| By Anayo Ezugwu | Feb 15, 2016 @ 01:00 GMT |
A NEW report by the PriceWaterhouseCoopers, PwC, has shown that Nigeria will lose 30 percent of its GDP by 2030 to corruption. Uyi Akpata, country and regional senior partner, West Market Area, PwC, disclosed this when he led a PwC team to submit the report to the Vice President Yemi Osinbajo at the Presidential Villa, Abuja.
Speaking on the report entitled: “Impact of Corruption on Nigeria’s Economy” Akpata said, “The results of the study show that corruption in Nigeria could cost up to 37 percent of Gross Domestic Products, GDP, by 2030 if it’s not dealt with immediately. This cost is equated to around $1,000 per person in 2014 and nearly $2,000 per person by 2030. The boost in average income that we estimate, given the current per capita income, can significantly improve the lives of many in Nigeria.”
According to PwC, “Several steps were used in the report to estimate Nigeria’s cost of corruption. The first of which was to examine over 30 studies to understand the way that corruption affects GDP in Nigeria. The study was obtained from International organisations including the OECD, IMF, DFID and Transparency International, Nigerian Academics affiliated with Nigerian Universities published by other Academics across mediums such as journals, articles and PhD publications among others as well as in-house studies assessing the health of the Nigerian economy such as the World in 2050 publication.”
Andrew S Nevin, PwC chief economist and co-author of the report, said the IMF study was selected to estimate impact of corruption on economic growth. He noted that PwC formulated the ways in which corruption impacts the Nigerian economy over time and then estimated the impact of corruption on Nigerian GDP, using empirical literature and PwC analysis.
He said, “We estimate the ‘foregone output’ in Nigeria since the onset of democracy in 1999 and the ‘output opportunity’ to be gained by 2030, from reducing corruption to comparison countries that are also rich in natural resources. The countries we have used for comparison are: Ghana, Colombia and Malaysia.”
The report further noted that corruption is a pressing issue in Nigeria which affects public finances, business investment as well as standard of living. It listed three dynamic effects of corruption to include; lower governance effectiveness, especially through smaller tax base and inefficient government expenditure.
PwC studies estimate Nigeria’s tax revenues at eight percent of GDP, which is the lowest compared to other countries; weak investment, especially Foreign Direct Investment explaining that it’s harder to predict and do business under such circumstances. Also affected is lower human capital as fewer people, especially the poor, are unable to access healthcare and education.
According to the report obtained from the PwC website, PwC used the IMF study estimates which show that the impact of one point change in the corruption index results in a 1.2 percentage point change in economic growth per annum. The company also used the study’s methodology in calculating impact on growth when a country moves from its own rank to another country’s rank on the corruption index.
The study shows the impact from corruption, irrespective of the following which may also impact the growth of the economy: initial level of income in the economy, natural resources, level of trade openness over the period and change in terms of trade over the period, investment ratio to GDP average over the period, country-specific variability in commodity prices and geographic location i.e. Sub-Saharan Africa.
“We do not attempt to capture the impact of corruption on growth through the interaction of corruption with other issues that may dampen economic growth. Therefore, the impact on economic growth from a simulated decrease in corruption will not capture the impact on growth from other factors that independently affect growth. Such factors include: political stability and strength of public institutions among others.
— Feb 15, 2016 @ 01:00 GMT