As of 2016, the Nigerian public sector ranks as 136th out of 176 countries on Transparency Internationalís Corruption Perceptions Index, making it one of the most corrupt in the world. President Muhammadu Buhari has undertaken the mission to eradicate government corruption, in part through arrests, stricter financial disclosure requirements, and increased oversight. At the same time, Buhari is seeking to improve economic development by pivoting away from the oil industry and instead supporting agribusiness. An underappreciated element of these two approaches to the nationís economic challenges is the effect that they may have on stemming corruption. Because the oil sector was nationalized by the federal government and its revenues account for a majority of the nationís income, the selfish interests of government officials and private financiers converge, and a significant network of corruption has flourished around the industry. Therefore, a pivot away from Nigeriaís oil economy and renewed emphasis on agriculture could incidentally reduce the opportunities for embezzlement in the long run.
A New Window of Opportunity
The nationís petroleum industry is currently at its weakest point in decades. Crude oil production has fallen from approximately 1.77 million barrels per day in 2015 to 1.44 million barrels per day in January of this year, and global oil prices are at record lows. The industry is facing crumbling infrastructure and a decline in foreign investment. Militants in the Niger Delta routinely attack the nationís oil facilities and pipelines in order to secure local control over the resource; roughly 500 million liters (US$230 million worth of oil) were stolen from one Lagos pipeline in 2015 alone. Meanwhile, demand is weaker as the United States, Nigeriaís primary market for petroleum exports, pursues energy independence, largely through domestic production of shale oil and natural gas.
This slump is certainly a problem, insofar as it contributes to the current economic recession and rising unemployment. However, it also presents an opportunity for the country to reduce its dependency on oil revenue, which could then cripple some of the channels through which funds are stolen from the public purse.
Indeed, the oil industry is often at the center of embezzlement scandals. In 2014, the governor of the Central Bank of Nigeria (CBN) reported that some US$20 billion in revenue from the Nigerian National Petroleum Company (NNPC), a state-owned oil company, was not remitted to the federal government. By another estimate, the NNPC withheld US$25 billion in public funds between 2011 and 2015, the vast majority of which was likely siphoned into private coffers. In 2004, ABB Vetco Gray, a US oil company, admitted to paying US$1 million in bribes to the NNPC in exchange for government kickbacks. To make matters worse, Nigeria has a highly limited refining capacity, so it ships its crude oil abroad and meets the countryís energy requirements with imported gasoline. The government maintains a fuel subsidy program, ostensibly with the intention of lowering gas prices to benefit the poor. In practice, however, the program is woefully mismanaged, providing a conduit for importers and government officials to embezzle public funds.
It should come as no surprise that the petroleum industry invites malfeasance, given that it accounts for 35 percent of the countryís GDP and 90 percent of federal revenues. It seems plausible, however, that corruption would not have risen to its present levels had the petroleum industry not attained such a singular dominance over the national economy. In the several years following its independence in 1960, Nigeriaís economy relied chiefly on exported cash crops including cocoa, rubber, peanuts, and palm oil. In 1960, the agricultural sector employed roughly 71 percent of the nationís workforce and fostered steady growth. But with the advent of the oil boom in the 1970s and the establishment of the NNPC in 1977, corruption scandals proliferated. Since the government was the majority shareholder in the industry, revenues were distributed to the hands of public officials who could leverage their power to secure bribes and embezzle money without having to report to any higher governing authority.
The Promise of Agribusiness
However, an emphasis on large-scale agribusiness instead of petroleum could help improve the situation. Nigeria was a major agricultural exporter post-independence, but the countryís demographic growth rapidly outpaced its agricultural output. The sector suffers from extraordinarily low productivity and, as such, cannot meet the countryís alimentary needs. More than 50 percent of arable land remains idle, and only a small fraction that is used has achieved optimal output. Meanwhile, an estimated 60 percent of the population is farmers. This wasted potential is owed to the absence of capital; most farmers simply lack the funds, technology, equipment, and knowledge to maximize their yield.
President Buhari has pledged to revitalize the countryís agriculture, in part, to ensure food securityóthe country currently relies on imports to feed itselfóand to protect the economy from the effects of volatile global oil prices. Yet emphasizing agriculture could also mitigate the rampant corruption entangled with the petroleum industry. Agriculture is more decentralized, which means it would be driven by the private enterprise of regular Nigerians rather than by the narrow, self-interested pursuits of government bureaucrats. This system would supply a stream of revenue directly to farmers, lifting many of them out of poverty. And rising income could, in turn, obviate the fuel subsidy racket that so often fills the coffers of public officials.
Rice farming, for example, has already proven quite profitable in recent years as demand for the crop continues to increase, import restrictions reduce foreign competition, and the nationís foreign currency shortage stimulates domestic production. The nationís rice farmers are reaping the benefits of the price of rice today, which has more than doubled from what it was two years ago.
Of course, it would be remiss to overlook that corruption itself is a major impediment to the nationís agricultural development. Corruption inhibits the distribution of fertilizer and other farming equipment. When the government allocates money for purchasing farming equipment, a vast majority of the funds is stolen by state officials before a small fraction, if any, ends up in the hands of the intended recipients. At the same time, corruption in the agricultural sector is more remediable in that it precedes the production of agriculture rather than occurring throughit, unlike the inherent corruption in the centralized and state-dominated structure of the oil industry.
Nigeria is now ranked as the largest economy on the African continent. Yet, more than two-thirds of the population still languishes in abject poverty, as a few kleptocrats hoard much of the nationís oil wealth. The Buhari administration may not be the first to attempt to tackle the nationís endemic corruption. Nonetheless, the administrationís desire to diversify the economy in the midst of an economic crisis may provide a unique and potentially fruitful approach to the issue. Indeed, a long-term investment in agriculture and decreased dependence on oil revenue may not only improve the welfare of the average Nigerian, but also reduce opportunities for officials to steal from the public purse, or at least diminish the consequences of their theft for the average citizen.