Corruption affecting the maritime industry can add up to 15% of total transport and logistics costs and cost hundreds of millions of USD$ from gross domestic product, a case study / investigation has shown. And that’s an underestimate as the maritime researchers have only so far mostly focused on the direct cost of corruption rather than looking at the overall impact resulting in such things as extended lead times or delays.
The Maritime Anti-Corruption Network has been gathering data for over a decade to examine maritime corruption. Focusing on the Nigerian Port Sector, the study by QBIS, put a dollar value on the cost of corruption for the private sector, government and society resulting from corrupt practices in the maritime supply chain.
Examples of corruption include agencies having administrative monopolies over essential services intended to facilitate trade which creates opportunities for “coercive” corruption such as where government officials extract bribes for performing routing tasks during vessel and cargo clearance.
“The findings demonstrate a clear economic benefit and a compelling business case for proactive anticorruption measures by both governments and businesses. These benefits have positive ripple effects for the entire economy, domestic revenue mobilisation, the business climate, and people’s livelihoods,” the Maritime Anti-Corruption Network said.
Nigeria’s government has been making attempts to reduce corruption in its port sector. Prior to 2019, resolving a single case of bribery took between seven to 10 days, however, today, over 90% of incidents are resolved within 24 hours by the relevant government agency.
How maritime corruption hits Nigerian families
Nigeria is heavily dependent on maritime trade for food and other daily consumables such as petrol, textiles, construction materials, vehicles and a wide range of other products. Corrupt practices cause a rise in import costs which then impact household demand rather than other sectors. Nearly two thirds of Nigerians are said to be “multi-dimensionally poor” and so most Nigerian families do not have a budget surplus. Corruption-increased import costs are likely to reduce their household demand and make basic goods less affordable. The study estimates that the cost of corruption adds about 1-2 per cent to the retail prices paid by the customer for grain and petrol.
“This results in less consumption and less sales and negatively impacts GDP, tariffs collected by Customs, and job creation,” the study notes, adding that the annual reduction in GDP is in the region of USD$204 million, an annual reduction in customs revenue of US$42 million, and about 235,000 fewer full time equivalent jobs because of less sales and economic activity.
Successfully preventing maritime corruption in Nigeria could cut the cost of corruption by more than 62%, which is more than USD$100 million a year, equivalent to about USD$114,000 per import shipment. In turn, that cuts the economic damage of corruption by USD$230 … which in turn contributes to more economic activity, the report notes.
“Although the study is based on a hypothetical zero-tolerance scenario, the efforts of MACN in Nigeria illustrate that achieving zero tolerance for corruption is feasible, even in areas historically plagued by such challenges,” the report notes.
