The Costs of Corruption in the Public Sector

When the Public Loses Faith

Corruption in government is nothing new. And it’s not limited to nations and governments that are developing or are on already shaky ground due to civil discord or poverty.

The issue is how we, as a world community, combat it. Because not only does corruption exact a significant financial toll, but its influence may obscure real progress that’s otherwise being made in improving systems, policies and procedures that are essential in order to build effective governments.

There is tremendous concern among world economic leaders over public sector corruption, and rightfully so: A 2016 research paper by the International Monetary Fund said it drains $1.5 trillion to $2 trillion from the global economy.

Those costs are compounded by a heavier price paid in terms of restricted economic growth, lost tax revenues and worsening poverty. But even more debilitating yet are the indirect costs that are hard to quantify but no less serious. How does a nation or a society recover when corruption has undermined trust and when the ethical standards private citizens hold are continuously being compromised?

It was an issue I was forced to grapple with myself over the course of a three-year project in Nigeria, when I was brought in by government officials to lead a much-needed and long-delayed overhaul of the government pension system. My experience leading public sector reform projects in Africa (including Nigeria) and other countries, combined with a reputation for integrity in my dealings, gave me credibility as a qualified outsider.

It was a significant challenge, largely as a result of the corruption that has long characterized the country.

Nigeria is Africa’s largest economy, but one that has seen an increase in the number of people living in poverty – about  86 million by some accounts . It’s also considered one of the most corrupt nations in the world. The 2017 Corruption Perceptions Index of Transparency International puts Nigeria in the 148^th spot of the 180 countries surveyed.

I was charged with restructuring a system that had been riddled with misappropriation and allegations of fraud for years. The task was to consolidate the system; separate government ministries managed their own small pension systems, but no one knew how much money was in each. There were a large number of “ghost” pensioners, whose money was pocketed by ministry officials.

The civil service pension that was brought into the new system, for example, had 103,000 pensioners on its payroll and over 60,000 complaints. A painstaking verification process eliminated the “ghosts,” but also restored the hope of genuine pensioners who had been excluded from receiving their benefits for years.

But all the good work our team accomplished – real pensioners helped and lots of money saved and safe in the government treasury – couldn’t overcome negative campaigning against our work by those corrupt agency heads who were losing control over their cash cows.

And the people?

They had been living with systemic corruption for so long that they trusted no one and were willing to believe the worst of everyone. Those are the sort of fractures of faith that will keep a country from succeeding with a progressive agenda.

Nigeria, sadly enough, is not the only nation whose progress is hampered by corruption. Combatting it can take many forms. Strengthening public financial management systems is one recommendation. The use of information technology for transactions helps. In the case of the Nigerian pension system, it helped to cut out intermediaries, enabled direct payment to pensioners’ accounts from the Central Bank and, most importantly, kept records confirmed that my effort and the clean-up work was above dispute. And, of course, stronger public policymaking is another – and one that’s at the heart of many development projects funded by organizations like the World Bank.

But there are no easy ways to restore people’s faith and trust in their leaders and institutions.