Entrepreneurs are the engine of growth in most thriving economies. Their ideas and innovations boost productivity and improve standards of living thus making the private sector the drivers of economic growth in many nations. For the private sector to thrive, certain conditions need to exist or not exist and corruption has been identified as one of the most significant conditions constraining the growth of the private sector.
The importance of the private sector in Nigeria cannot be overstated. In April 2018, the Vice President of Nigeria Prof Osinbajo at the launch of the Nigerian Economic Diplomacy Iniave (NEDI) noted that the private sector is particularly important because it accounts for well over 90 percent of the nation's GDP. Therefore, unchecked corruption in the private sector makes it an existential threat to the growth of the nation.
Figure I shows the correlation of an overall negave relationship between control of corruption and economic growth. Corruption is defined by Transparency International as 'the abuse of entrusted power for private gain'.
For business, this means more than the perceived need to bribe public officials. Corruption risks inside a private enterprise include, among many others, corporate fraud, manipulating accounts and insider trading.
Corruption in dealing with customers and suppliers can take the classic form of kickbacks to public officials, but it also includes, for example, the bribing of purchase officers to win business at other companies' expense (Global Corruption Report 2009 published by Transparency International). Corruption can harm Nigeria in many ways, for example corruption has been observed to increase the size of the informal sector grossly reducing the tax base needed to make Corporate An Bribery and Corruption Compliance Capacity Survey Report infrastructural investments that improve the lives of the citizens. Friedman et al. (2000) using the Internaonal Country Risk Guide (ICRG) corruption index shows that corruption promotes the growth of the informal sector.
They argue that a one -point improvement in the corruption index is associated with a 9.7% reduction in the size of the informal sector. This is because economies characterized by burdensome regulations as is the case in Nigeria impose on firms prohibitively high costs of entry that can only be avoided by the exchange of a bribe (Gonzalo Puccio, 2013). Furthermore, this corruption-induced informality will also limit the growth of those businesses that have gone underground. To remain unnoticed, these businesses will limit their access to financial systems, public services and expansion.
While the current legal framework and individual companies' internal policies and systems contribute to efforts to mitigate corruption, increased bribery and corruption risks are discouraging higher rates of investment and the ability of companies to conduct business fairly on a level playing field (OECD, 2016). This raises the question of the efficacy and comprehensiveness of existing an-corruption mechanisms in the business community in Nigeria.
Companies have to install an -corruption culture and ethics in order to effectively implement an an-corruption compliance program essential to tackle the roots of corrupon in company operaons. For more localized understanding, the Center for International Private Enterprise (CIPE) and IoD Centre for Corporate Governance (IoDCCG) developed a baseline survey to ascertain the extent of awareness and depth or level of implementation of an-corruption compliance system capacities by private companies in Nigeria. What follows is a presentation of the responses to the questions administered in the survey.
The Impact of Corruption on FDI
Notable investors have withdrawn from doing business in Nigeria because of corruption. Brunel's CEO Jan Arie van Barneveld said to the Dutch financial daily, Het Financieele Dagblad (FD) that the Group decided to shut down its business in Nigeria because of rampant corrupt practices, which made it impossible to do business without breaking rules. Similarly, Virgin's founder, Richard Branson reportedly closed Virgin Nigeria, a joint venture with the Nigerian government in September 2012, at 8 years of baling "install corruption" (Simon Calder, Independent, 2018)