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Impact of Corruption
on Nigeria's Economy
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Contents
Executive summary
Introduction
Corruption and its impact on the economy
Methodology for creating scenarios
Results demonstrating the economic
cost of corruption in Nigeria
Appendices
Scenario 1
Scenario 2
Scenario 3
Country case studies
Bibliography
Contacts
2 Impact of Corruption on Nigeria's Economy
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Executive summary
Corruption is a pressing issue in Nigeria.
President Muhammadu Buhari launched
an anti-corruption drive after taking
office in May, 2015. Corruption affects
public finances, business investment as
well as standard of living. Recent
corruption scandals have highlighted the
large sums that have been stolen and/or
misappropriated. But little has been
done to explore the dynamic effects of
corruption that affect the long run
capacity of the country to achieve its
potential. Channels through which this
may occur include:

Lower governance effectiveness,
especially through smaller tax base
and inefficient government
expenditure. PwC studies estimate
Nigeria’s tax revenues at 8% of GDP,
which is the lowest for comparison
countries

Weak investment, especially FDI, as
it’s harder to predict and do
business

In this report we formulate the ways in
which corruption impacts the Nigerian
economy over time and estimate the impact
of corruption on Nigerian GDP, using
empirical literature and PwC analysis. 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.
Our results show that corruption in Nigeria
could cost up to 37% of 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.
We believe this work provides robust
evidence and impetus for reducing
corruption in Nigeria.
Lower human capital as fewer people,
especially the poor, are unable to
access healthcare and education
PwC
3
Introduction
In this paper, we estimate the negative impact of corruption
in Nigeria
President Muhammadu Buhari
launched an anti-corruption drive
after taking office in May, 2015. This
comes after a series of high profile
corruption scandals in Nigeria that
have highlighted the sheer size of the
corruption problem.
In this paper, we explore the negative
impact of corruption on Nigeria’s
GDP.1
To do this, we:
• first, analyse how corruption
affects the economy over time;
• second, estimate the ‘foregone
output’ in Nigeria by simulating
lower corruption in the past 15
years; and
• third, estimate the output that
Nigeria can achieve by simulating lower
corruption in the next 15 years.
The lower corruption scenarios are
simulated based on the corruption levels of
benchmark countries.
In the next paper, we will explore how
anti-corruption policies affect corrupt
behaviours and which policies are likely to
have the biggest impact in Nigeria.
Over a series of papers, we address the following questions:
paper 1
what is the impact of
corruption on the
Nigerian economy
what is the cost of
corruption in Nigeria
paper 2
which anti-corruption
policies are most
suitable to address
corruption in Nigeria
4 Impact of Corruption on Nigeria's Economy
what policies can be
used to reduce
corruption
1
Referred to as ‘economic cost of corruption’
or ‘cost of corruption’ for simplicity.
Corruption and its impact on the economy
We have undertaken five steps to estimate Nigeria’s cost of corruption
4
2
Reviewed the empirical
literature on the impact of
corruption on economic
growth to inform our estimates
of the link between the
corruption perceptions index
and GDP.
Literature
review
Identifying
impact of
corruption
on economic
growth
Created 3 scenarios that show
the lower levels of corruption
that Nigeria could have
achieved in the past and
can achieve in the future.
Benchmark
Nigeria
Scenario
building
Estimating
impact
1
3
5
Studied >30 papers that quantify
the impact of corruption on
economic outcomes.
Identified the transmission
channels of corruption on
economic outcomes.
Identified 3 comparator
countries that meet the criteria
for providing relevant
benchmarks to Nigeria.
Calculated the impact of
corruption on economic
growth and output for each
scenario, using the coefficient
identified in step 2.
We examined over 30 studies to understand the way that corruption affects GDP in Nigeria
We examined 32 studies in total; 20%
sponsored by International organisations
including the OECD, IMF, DFID and
Transparency International; 22%
published by Nigerian Academics
affiliated with Nigerian Universities; 16%
published by other Academics across
mediums such as journals, articles and
PhD publications among others; as well as
3% in-house studies assessing the health
of the Nigerian economy such as the
World in 2050 publication (please see
bibliography for further details).
Seventy percent (70%) of the 32 studies
quantitatively evaluated the impact of
corruption on economic growth through
regression techniques whilst also
exploring the qualitative links between
corruption and economic outcomes. Of
these 22 papers, we selected 3 studies
that explicitly accounted for
endogeneity.2
2
This means that the study is able to avoid overestimating the impact of corruption
due to other factors that affect growth and are correlated with corruption.
Of the shortlisted 3 studies, we selected
the IMF study “Does Mother Nature
corrupt? Natural Resources, Corruption
and Economic Growth” by Leite and
Weidman (1999) to estimate impact of
corruption on economic growth. We chose
this study because:
 It controls for endogeneity using the
two stage least squares econometric
regression.
 It accounts for Nigeria specific
confounding factors such as the
prevalence of natural resources
rents, which are generally associated
with higher levels of corruption in
the literature.
 The data set encompasses a large
number of countries, including
Nigeria, therefore making the results
highly applicable to Nigeria as well
as other similar benchmark
countries.
PwC
5
After reviewing the literature, we chose the IMF study to estimate the impact of corruption
on economic growth
The IMF study estimates that the
impact of 1 point change in the
corruption index 3 results in a 1.2
percentage point change in
economic growth per annum.
We also use the study’s
methodology - 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
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.
Benchmarking to identify comparison countries for Nigeria
Corruption Perceptions Index (CPI)
ranking
Natural resources rents and
corruption perceptions share a
positive correlation of 0.4
200
180
160
Nigeria
140
120
Colombia
100
80
Malaysia
60
Ghana
40
20
0
0
10
20
30
40
50
60
70
Total natural resources rents (% of GDP) average 2011 - 2013
3
The IMF uses the International Country Risk Guide (ICRG) index as a measure of corruption. This index is made up
of political, financial and economic risk assessments produced by International Reports. We use the Corruption
Perceptions Index (CPI) by Transparency International, see slide 10 for more details. The ICRG and CPI are strongly
correlated with correlation coefficients greater than 0.8, depending on the years in the sample. ICRG ranges from 06 and CPI ranges from 0-10. Therefore, we assume that a 1 point change in ICRG = 10/6th point change in the CPI.
6 Impact of Corruption on Nigeria's Economy
Source: Corruption: A Theoretical and Empirical Analysis, Christopher Tamina (2015)
Ghana, Colombia and Malaysia fulfil
the criteria. To calculate the cost of
corruption in Nigeria, we will simulate
that Nigeria faced lower corruption and
therefore higher growth between 1999
and 2014.
To build scenarios for the change in
corruption in Nigeria, we’ve selected
countries that meet the following
criteria:
 natural resources rents greater than
10% of GDP i.e. a resource rich
country 4
 have faced corruption problems and
rank better than Nigeria on the
Corruption Perceptions Index
 have implemented anti-corruption
policies before and have improved
corruption and macro-outcomes
To simulate lower corruption levels in
Nigeria, we show that between 1999 and
2014 Nigerian corruption was as low as:
 Scenario 1: Ghana’s
 Scenario 2: Colombia’s
 Scenario 3: Malaysia’s
We use the Transparency International measure and definition of corruption
What is corruption?
Corruption is defined and perceived
across a spectrum of illegal payments
and transactions such as bribes,
embezzlement, and money laundering
among others. Since corruption is
illegal, capturing the amount of
corruption is not possible, by
analysing the amounts of corruption
payments that have proven to be so in
court.
We use Transparency International’s
Corruption Perceptions Index (CPI) as
a proxy for corruption. This dataset
defines corruption as the ‘abuse of
public office for private gain’.
4
Various academic literature attribute the likelihood of high
corruption to high levels of natural resources in a country.
The index categorises corruption into three
parts:
 Grand corruption: ‘Acts committed at a
high level of government that distort
policies or the central functioning of the
state, enabling leaders to benefit at the
expense of the public good’

Petty corruption: ‘Everyday abuse of
entrusted power by low- and mid-level
public officials in their interactions with
ordinary citizens… often trying to
access basic public goods and services’

Political corruption: ‘Manipulation of
policies, institutions and rules of
procedure in the allocation of resources
and financing by political decision
makers, who abuse their position to
sustain their power, status and wealth’
PwC
7
The Global Corruption Barometer**: People's perceptions on Nigeria vary by institutions
Businesses
Judiciary
Military
Low
Political
parties
Police
Parliament
& legislature
Perception of corruption
Score 4-5*
Score 3-4*
High
Score 2-3*
**The Global Corruption Barometer is a representative survey of more than 114,000 households in 107 countries. We use the Corruption Perceptions Index for our
analysis as it is more commonly used in literature, making it easier for comparison and sensitivity analysis.
The Corruption Perceptions Index measures perceptions rather than amounts of
corruption each year
Interpreting the Corruption Perceptions Index (CPI)
The index measures the perception of
corruption across big and small
businesses, rich and poor citizens,
country experts, local media and
international organisations. These
scores are amalgamated across surveys
and standardised across countries
every year so that the scores range
from 0 to 10.
The index is based on perceptions and
does not reflect the actual amounts of
corruption in countries. Unlike amounts of
corruption, perceptions are subjective and
may change drastically due to media
attention and sudden expositions of
corruption.
The index predominantly focusses on
corruption from the perspective of business
welfare in general. Therefore, it lacks indepth information about where or which
type of corruption is dominant.
Perceptions are measured for:
Experts interviewed range from:
 Accountability of the
government to the public
 Success of the judicial system to
prosecute
 Ease of access of information to
the public
 Transparency of government
actions, particularly spending
 The extent to which bribes are
paid for favours
 The independence of
government branches
 The strength of the country’s
institutional framework in
managing corruption




8 Impact of Corruption on Nigeria's Economy
Global and local experts
Multilateral lending institutions
International organisations
Local newspapers and
magazines
 Country specialists who draw on
opinions of in-country
freelancers, clients and others
 Survey of business leaders who
represent cross-section of
nation’s corporate community
 Local and foreign enterprises
Interviewees come from the
following institutions at both
the national-level and local
level:
 Police and military
 Executive, legislative and
judiciary
 Taxation, customs and licensing
bodies
 Inspection bodies
Corruption has a dynamic impact, which is felt more by poorer households and smaller
firms
The dynamic effect: corruption has a long run negative impact on growth, primarily through reduction in human capital
and investment
04
01
Corruption
 Predictable corruption becomes a cost
of ‘business as usual’, which
businesses pass on to consumers
 Unpredictable corruption deters
investment and innovation
rr
co
n…
tio
up
ng
qu
ti
e
l
r
in oo su
es p , re
s
&
ea y ns
cr ert tio
n
i ov tu
p sti
in
...
in
…
Factors affecting corruption
 Poverty
 Poor institutions
 Sudden surge of natural
resources rent
y,
it
Disproportionate impact
self perpetuating cycle
of corruption and
poverty
Households
s gr
er ic
w
lo om
… on
ec
Rich pay lower
proportion of
income in tax
Poor lack
access to
public goods
t
en
th
ow
03
Macroeconomic outcomes from
corruption
 Lower labour productivity
 Lower capital formation
 Inequity and poverty
 Lower economic growth
Source: Global Corruption Barometer and Transparency International 2013
tm
es
nv ity
i
v
s
ce cti
du odu
e
…r d pr
an
Businesses
Big corporates
raise barriers to
entry
SMEs have
more limited
access to credit
02
Channels
 Lower human capital
 Higher leakage through money
laundering
 Weak investment
 Poor fiscal revenue and expenditure
 Poor institutions
PwC
9
Government Businesses Household
Countries with higher corruption are associated with lower tax revenue and expenditure
as a % of GDP
Corruption is associated with poor public
finance management and provision of public
goods
 Corruption encourages tax avoidance, resulting
in a lower tax base for government revenue
collection. PwC studies estimate Nigeria’s tax
revenues at 8% of GDP, which is the lowest for
comparison countries.
Corruption is associated with erosion of
talent in public institutions and
therefore, government effectiveness
 Corruption encourages hiring based on
nepotism, cronyism and patronage, not
merit. Therefore, reducing the quality of
the public institutions.
 There is unnecessary bureaucracy,
 Corruption allows for government expenditure
creating further opportunities for bribes.
in vested interest rather than public interest.
 Therefore, enforcement of contracts and
 Therefore, resulting in a lack of provision for
property rights is weak.
public goods such as infrastructure for
businesses; and education and healthcare for
households.
30
Countries with higher corruption are
associated with lower tax revenue
Correlation coefficient = -0.39
Tax revenue (% GDP)
25
20
15
10
Malaysia
Colombia
Ghana
5
Nigeria
0
Low
-------------------------------------> High
Corruption Perceptions Index (CPI)
30
Government expenditure (% GDP)
Countries with higher corruption are
associated with lower tax revenue
Correlation coefficient = -0.21
25
20
Colombia
15
Malaysia
Ghana
10
Nigeria
5
0
Low
10 Impact of Corruption on Nigeria's Economy
---------------------------------------> High
Corruption Perceptions Index (CPI)
Sources: World Bank Development Indicators and PwC analysis
Government Businesses Household
Corruption is associated with lower investment; and higher prices and barriers to entry
for businesses
Corruption is associated with an
increase in barriers to doing business
 Big companies are able to access
public goods by leveraging their
balance sheets. These include stable
electricity and water pipes among
others.
 Smaller firms cannot afford these and
rely on the government for provision
but corruption weakens public fund
management and public goods
provision. Therefore, it makes it more
difficult for SMEs to compete.
Countries with higher corruption are
associated with higher prices
20
16
Correlation coefficient = 0.40
Ghana
14
12
Nigeria
10
8
6
Colombia
4
2
0
 Corruption is associated with lower
technological transfers as foreign
companies are unable to protect
intellectual property.
Countries with higher corruption are
associated with lower investment
Malaysia
Low -------------------------------------------- > High
Corruption Perceptions Index (CPI)
Correlation coefficient = -0.45
12
Foreign Direct Investment
(logUS$ inflow)
Inflation (CPI % change)
18
Corruption is associated with lower
property rights and investment,
especially FDI
 Corruption threatens property
rights, discouraging investment
that requires high capital
expenditure as businesses are
unwilling to place high capital at
risk.
11
Colombia
10
9
8
Malaysia
Nigeria
Ghana
7
6
5
4
Low -------------------------------------------> High
Corruption Perceptions Index (CPI)
PwC 11
Government Businesses Household
Corruption is associated with lower average standard of living, education levels and
greater inequality
50
45
GDP per Capita in ‘000s
Countries with higher corruption are
associated with lower income per
capita and standard of living
Correlation coefficient = -0.62
40
35
30
25
20
Malaysia
15
10
5
0
Colombia
Nigeria
Ghana
Low --------------------------------------------> High
Corruption Perceptions Index (CPI)
124
Secondary enrolment (% gross)
Countries with higher corruption are
associated with lower education levels
Correlation coefficient = -0.66
104
Colombia
84
64
44
Malaysia
Ghana
Nigeria
24
4
Low --------------------------------------------> High
Corruption Perceptions Index (CPI)
60
SWID Gini Index (0-100)
Countries with higher corruption are
associated with higher income inequality
Correlation coefficient = 0.35
55
50
45
40
Colombia
Nigeria
Malaysia
Ghana
35
30
25
20
Low --------------------------------------------> High
Corruption Perceptions Index (CPI)
12 Impact of Corruption on Nigeria's Economy
Sources: World Bank Development Indicators, The Standardized
World Income Inequality Database and PwC analysis
Methodology for creating scenarios
We created three scenarios to simulate the ‘foregone output’ and the ‘output
opportunity’ for Nigeria
We estimate the ‘foregone output’ in
Nigeria since the onset of democracy in
1999 up to 2014 and the ‘output
opportunity’ to be gained by 2030.
We do this based on 3 scenarios that
simulate; Nigeria catches up with
Ghanaian, Colombian and Malaysian
Corruption Perceptions Index scores
respectively, within five years of
introducing anti-corruption policies,
and gains from these lower levels of
corruption for ten years.
The cost of corruption estimation is
based on the dampening effects of
corruption on Nigerian GDP from using
the IMF paper calculations.
Our simulations have a twofold effect
on Nigeria’s corruption perceptions
index scores and GDP:
a. A gradual increase in the Nigerian CPI
score over 5 years so that the Nigerian
CPI score is equal to that of the
comparison country’s by year 5. During
this time period, Nigerian GDP slowly
gains from gradual improvements in CPI.
b. An average increase in Nigerian CPI by
the average annual difference between
Nigeria and the comparison country’s
CPI scores between year 5 and year 15.
During this time period, Nigerian GDP
gains from an average annual
enhancement due to lower corruption.
See pages 18 - 20 for further explanation and
illustrations of each scenario.
PwC 13
Results demonstrating the economic cost of
corruption in Nigeria - Scenario 1 (Ghana)
Nigeria’s 2014 GDP could have been
USD 113 bn higher if it had reduced
corruption to Ghana’s levels
Nigeria’s GDP could have been 22%
higher in 2014 if it had reduced
corruption to Ghana’s levels
22%
Losses from corruption per person, USD
2000 2001 2002 2003 2004 2005
2
7
15
27
42
81
2006
125
14%
12%
10%
10%
2009
291
4%
2010
364
2011
428
2012
494
2014
2013
2011
2012
2010
2009
2007
2013
567
2008
2%
2006
1999
2008
229
6%
0.5%1% 1%
0.1%
0%
2007
174
8%
introduction of
anti-corruption
5% policies
2014
2012
2013
2008
2009
2006
2007
2004
2005
1999
2000
2001
2002
2003
100
2010
2011
Baseline Levels
Scenario Levels
200
16%
15%
2005
300
18%
2004
400
20%
2002
513
20%
2003
500
Cost of Corruption (% GDP)
-113
2001
600
USD bn at 2013 prices
25%
626
2000
700
2014
651
We use average Naira to USD exchange rate over the 15 year period between 1999 - 2014 to convert corruption losses
and GDP. This is to avoid skewing results from currency fluctuations.
Nigeria’s 2030 GDP can be USD
327 bn higher if it reduces
corruption to Ghana’s levels
Nigeria’s 2030 GDP can be
22% higher if it reduces
corruption to Ghana’s levels
2000
25%
1,783
1800
22%
20%
1,456
1400
1200
1000
Baseline
Scenario
800
20%
Cost of Corruption (% GDP)
1600
18%
16%
15%
14%
12%
10%
10%
Scenario:introduction
ofanti-corruption
5% policies
8%
6%
4%
Losses from corruption per person, USD
2016 2017 2018 2019 2020 2021
5
16
34
58
91
170
2022
257
2023
350
2024
450
2025
558
2026
671
2027
793
2028
924
2029
1065
2030
2029
2028
2027
2025
2026
2024
2023
2022
2021
2020
2019
2018
2017
2016
2030
2029
2027
2025
2026
2024
2023
2021
2020
2019
2017
2018
2016
2015
2022
0%
600
2015
1% 2% 2%
0.2%0.5%
2028
USD bn at 2013 prices
+327
2030
1217
For projecting Nigerian GDP, we use the PwC World in 2050 macroeconomic model.
For projecting Nigerian population growth, we use IMF forecasts and PwC analysis.
14 Impact of Corruption on Nigeria's Economy
Sources: PwC analysis, IMF WEO and Transparency International
Scenario 2 (Colombia)
Nigeria’s 2014 GDP could have been
USD 93 bn higher if it had reduced
corruption to Colombia’s levels
Nigeria’s 2014 GDP could have been
18% higher if it had reduced
corruption to Colombia’s levels
20%
10%
2013
2012
2011
2009
2010
2008
2007
2006
2005
Scenario: introduction
5%
of anti-corruption
4%
policies
2%
2%
1%
0.2%0.5%
2003
2013
0%
7%
2004
6%
4%
2014
2011
2012
2009
2010
2007
2008
2005
2006
2003
2004
2001
2002
1999
2000
8%
8%
2%
100
12%
10%
12%
2002
200
13%
14%
2001
Baseline Levels
Scenario Levels
15%
2000
300
17%
16%
1999
400
Losses from corruption per person, USD
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
3
8
16
29
47
79 114 155 199 250 309 360 412 471 537
We use average Naira to USD exchange rate over the 15 year period between 1999 - 2014 to convert corruption losses
and GDP. This is to avoid skewing results from currency fluctuations.
Nigeria’s 2030 GDP can be 19%
higher if it reduces corruption to
Colombia’s levels
Nigeria’s 2030 GDP can be USD
270 bn higher if it reduces
corruption to Colombia’s levels
20%
10%
2027
667
2028
772
2029
884
2030
2029
2028
2027
2026
2030
2029
2027
2028
2026
2025
2024
2022
2023
2021
2020
2019
2018
2017
2016
2015
Losses from corruption per person, USD
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
6
18
37
64
100
165
236
311
392
479
570
For projecting Nigerian GDP, we use the PwC World in 2050 macroeconomic model.
For projecting Nigerian population growth, we use IMF forecasts and PwC analysis.
2025
2%
2024
4%
7%
Scenario: introduction
6%
of anti-corruption
4%
policies
3%
2%
1% 1%
0.2%
2023
6%
0%
600
9%
8%
2022
800
10%
2021
Basline levels
Scenario levels
12%
12%
2020
1000
14%
2019
1200
15%
13%
2017
1,457
16%
2018
+270
17%
2015
1600
19%
18%
2016
1,726
Cost of Corruption (% GDP)
1800
1400
USD bn at 2013 prices
USD bn at 2013 prices
513
500
Cost of Corruption (% GDP)
-93
600
18%
18%
2014
606
700
2030
1004
PwC 15
Scenario 3 (Malaysia)
Nigeria’s 2014 GDP could have been
USD 185 bn higher if it had reduced
corruption to Malaysia’s levels
Nigeria’s 2014 GDP could have been
36% higher if it had reduced
corruption to Malaysia’s levels
40%
36%
698
35%
-185
30%
32%
2013
2014
2011
2010
2009
2008
2007
1999
2014
2012
2013
2011
2010
2009
2007
2008
2005
2006
2004
2002
2003
2001
1999
2000
0
Scenario Levels
2005
Baseline Levels
100
2006
200
12%
Scenario:introduction
10%
10% of anti-corruption
policies
7%
4%
5%
3%
2%
0% 1%
0%
2004
300
16%
15%
2002
400
22%
19%
20%
2003
513
25%
2001
500
29%
25%
2000
600
Cost of Corruption (% GDP)
USD bn at 2013 prices
700
2012
800
Losses from corruption per person, USD
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
4
12
25
45
73 133 202 281 368 468 586 692 800 923 1064
We use average Naira to USD exchange rate over the 15 year period between 1999 - 2014 to convert corruption losses and
GDP. This is to avoid skewing results from currency fluctuations.
Nigeria’s 2030 GDP can be 37%
higher if it reduces corruption to
Malaysia’s levels
Nigeria’s 2030 GDP can be USD 534
bn higher if it reduces corruption to
Malaysia’s levels
40%
26%
25%
22%
19%
20%
16%
Losses from corruption per person, USD
2016 2017 2018 2019 2020 2021
9
28
57
99
156
280
2022
416
2024
725
2025
898
2026
1083
For projecting Nigerian GDP, we use the PwC World in 2050 macroeconomic model.
For projecting Nigerian population growth, we use IMF forecasts and PwC analysis.
16 Impact of Corruption on Nigeria's Economy
2027
1283
2028
1500
2029
1735
2030
1990
2029
2030
2028
2027
2020
2019
2018
2017
2015
2023
564
2016
2030
2029
2027
2025
2026
2023
2024
2022
2021
2020
2019
2018
2017
2015
2016
0%
2026
5%
2025
10%
13%
Scenario: introduction
10%
of anti-corruption
7%
policies
4%
3%
2%
0% 1%
2023
15%
Basline levels
Scenario levels
800
29%
30%
2024
1000
33%
2021
1200
Cost of Corruption (% GDP)
1,457
1400
2028
USD bn at 2013 prices
+534
1600
600
35%
1,991
1800
37%
2022
2000
If corruption is addressed, Nigeria’s GDP could be USD 534 bn higher in 2030
The Graph below summarises the three scenarios
Sources: PwC analysis, IMF WEO and Transparency International
Nigeria’s 2030 GDP can be up to USD 534 bn higher if it reduces corruption
2500
Impact from reducing corruption
2000
534
2030 GDP
327
Scenario:
Colombia
Scenario:
Ghana
USD bn
1500
270
1000
1457
500
0
Baseline
Scenario:
Malaysia
We use average Naira to USD exchange rate over the 15 year period between 1999 - 2014 to convert
corruption losses and GDP. This is to avoid skewing results from currency fluctuations.
For projecting Nigerian GDP, we use the PwC World in 2050 macroeconomic model.
Abbreviations








CPI - Corruption Perceptions Index
ICRG - International Country Risk Guide
GDP - Gross Domestic Product
IMF - International Monetary Fund
IMF WEO - International Monetary Fund World Economic Outlook
FDI - Foreign Direct Investment
DFID - Department for International Development
OECD - Organisation for Economic Co-operation and Development Sources: PwC analysis, IMF WEO and Transparency International
PwC 17
Appendices
Scenarios used to simulate the cost of corruption in Nigeria
Scenario 1: Nigeria reduces corruption to Ghana’s levels
100
80
60
40
Nigeria
Ghana
2013
2014
2011
2012
2010
2009
2008
2007
2006
2005
2003
2004
2001
1999
0
2002
20
2000
CPI ranking, normalised
Nigeria reduces CPI ranking to 44 by 2004 and 35 by 2014
Scenario 1
Nigeria baseline CPI scores and Ghana CPI scores
CPI scores, normalised
6
5
4
3
2
1
0
1999
2004
Nigeria
2009
2014
Ghana
Nigeria reduces CPI ranking to 44 by 2004 and 35 by 2014
CPI scores, normalised
5
4
3
2
1
0
Year 1
Year 5
Year 10
Year 15
Nigeria, scenario 1
Nigeria
We estimated the foregone output due to corruption for Nigeria between 1999 and 2014 and between 2015
and 2030 based on the scenario that Nigeria catches up with Ghana’s corruption levels within five years of
introducing anti-corruption policies and gains from lower levels of corruption for ten years.
The cost of corruption estimation is based on the dampening effects of corruption on output in Nigeria from:
 A gradual increase in the Nigerian CPI score by 2 points over 5 years so that the Nigerian CPI score is equal
to that of Ghana by year 5.
 An average increase in Nigerian CPI by 1.59 points per annum, which is the average annual difference
between Nigeria and Ghana CPI scores between year 5 and year 15.
18 Impact of Corruption on Nigeria's Economy
Scenario 2: Nigeria reduces corruption to Colombia’s levels
CPI ranking, normalised
Nigeria reduces CPI ranking to 41 by 2004 and 54 by 2014
Nigeria
Colombia
2013
2014
2012
2011
2009
2010
2007
2008
2005
2006
2004
2002
2003
2001
1999
2000
100
90
80
70
60
50
40
30
20
10
0
Scenario 2
Nigeria baseline CPI scores and Colombia CPI scores
CPI scores, normalised
6
5
4
3
2
1
0
1999
2004
Nigeria
2009
2014
Colombia
Nigeria CPI scenario scores
CPI scores, normalised
5
4
3
2
1
0
Year 1
Year 5
Year 10
Nigeria, scenario 2
Year 15
Nigeria
We estimated the foregone output due to corruption for Nigeria between 1999 and 2014 and between 2015
and 2030 based on the scenario that Nigeria catches up with Colombia’s corruption levels within five years of
introducing anti-corruption policies and gains from lower levels of corruption for ten years.
The cost of corruption estimation is based on the dampening effects of corruption on output in Nigeria from:
 A gradual increase in the Nigerian CPI score by 2.2 points over 5 years so that the Nigerian CPI score is
equal to that of Colombia’s by year 5.
 An average increase in Nigerian CPI by 1.28 points per annum, which is the average annual difference
between Nigeria and Colombia CPI scores between year 5 and year 15.
PwC 19
Scenario 3: Nigeria reduces corruption to Malaysia’s levels
120
100
80
60
40
2014
2013
2011
2012
2009
2010
2007
Malaysia
2008
2005
Nigeria
2006
2003
2004
2001
1999
0
2002
20
2000
CPI ranking, normalised
Nigeria reduces CPI ranking to 27 by 2004 and 29 by 2014
Scenario 3
Nigeria baseline CPI scores and Malaysia CPI scores
CPI scores, normalised
6
5
4
3
2
1
0
1999
2004
2009
Nigeria
Malaysia
Year 5
Year 10
2014
Nigeria CPI scenario scores
CPI scores, normalised
6
5
4
3
2
1
0
Year 1
Nigeria, scenario 2
Year 15
Nigeria
We estimated the foregone output due to corruption for Nigeria between 1999 and 2014 and between 2015
and 2030 based on the scenario that Nigeria catches up with Malaysia’s corruption levels within five years of
introducing anti-corruption policies and gains from lower levels of corruption for ten years.
The cost of corruption estimation is based on the dampening effects of corruption on output in Nigeria from:
 A gradual increase in the Nigerian CPI score by 3.4 points over 5 years so that the Nigerian CPI score is
equal to that of Malaysia’s by year 5.
 An average increase in Nigerian CPI by 2.43 points per annum, which is the average annual difference
between Nigeria and Malaysia CPI scores between year 5 and year 15.
20 Impact of Corruption on Nigeria's Economy
Country
case studies
Nigeria
Nigeria is a natural resources rich and populous country
with high inequality and low foreign direct investment.









GDP (current US$) - $568.5bn
Total Population - 177.5mn
Primary school enrolment (% gross) - 85%
Poverty headcount ratio at national
poverty lines (% pop.) - 46.0%
Life expectancy at birth (years) - 52
GNI per capita (current US$) - $2,970
Exports (% GDP) - 16.1%
FDI (% GDP) - 1.1%
Gini coefficient - 43
Nigeria has introduced policies to reduce corruption and
crime, since the introduction of democracy in 1999.
Examples include:
 The Money Laundering Act 1995
 2000, President Olusegun Obasanjo
inaugurated an anti-graft body, christened
The Independent Corrupt Practices and
Other Related Offences Commission
(ICPC)
 Economic and Financial Crimes
commission Establishment act (2004)
 The Money Laundering (Prohibition) act
2004
Sub-Saharan Africa
Criteria for scenario country selection:
16%
High natural resources
exports (% of GDP)
2.7
Relatively low CPI score
(high corruption)
136
High CPI rank (high
corruption)
Previous history of anticorruption policies
Ghana
Ghana is a natural resources rich country that ranks better
than Nigeria on the CPI and sees higher FDI.
Sub-Saharan Africa
 GDP (current US$) - $38.65bn
 Total Population - 26.79mn
 Primary school enrolment (% gross) -
107%
 Poverty headcount ratio at national





poverty lines (% pop.) - 24.2%
Life expectancy at birth (years) - 61
GNI per capita (current US$) - $1,600
Exports (% GDP) - 38.9%
FDI (% GDP) - 6.6%
Gini coefficient - 41
Ghana has implemented anti-corruption policies over the
past 25 years, significantly reducing corruption. Examples
of policies include:
 Commission on Human Rights and




Administrative Justice (1992) investigated
all instances of suspected corruption
The Serious Fraud Office Act (1993) - a
specialized agency to monitor, investigate
and prosecute any offence involving
serious financial or economic loss to the
State
The Ghana Anti-Corruption Coalition
(1999)
The anti-money laundering act 2008
The Whistleblowers Act 2006
Criteria for scenario country selection:
18%
High natural resources exports
(% of GDP)
4.8
Higher CPI score than Nigeria’s
(lower corruption)
61
Lower CPI rank than Nigeria’s
(lower corruption)
Previous history of anticorruption policies
PwC 21
Colombia
Colombia is a natural resources rich country that ranks
better than Nigeria on the CPI and sees higher life
expectancy at birth.









GDP (current US$) - $377.7bn
Total Population - 47.79mn
Primary school enrolment (% gross) - 115%
Poverty headcount ratio at national
poverty lines (% pop.) - 30.6%
Life expectancy at birth (years) - 74
GNI per capita (current US$) - $7,970
Exports (% GDP) - 16%
FDI (% GDP) - 4.2%
Gini coefficient - 50
Colombia drastically reduced corruption between 1999 and
2004, introducing anti corruption policies such as:
 1998 ratified the Inter-American
Latin America & Caribbean
Criteria for scenario country selection:
10%
High natural resources exports
(% of GDP)
3.7
Higher CPI score than Nigeria’s
(lower corruption)
Convention Against Corruption
 Commitment to e-government in 2000
and 2001 allowing greater public access
to information, government plans, legal
frameworks and other services
 Anti-money laundering regulation: setting
up of financial intelligence unit of
Colombia 1999 and Committee for
Coordination of Measures against Money
Laundering 2004
94
Lower CPI rank than Nigeria’s
(lower corruption)
Previous history of anticorruption policies
Malaysia
Asia
Malaysia is a natural resources rich country that ranks
higher on the CPI than Nigeria, and has better standard of
living indicators:









GDP (current US$) - $326.9bn
Total Population - 29.90mn
Primary school enrolment (% gross) - 101%
Poverty headcount ratio at national
poverty lines (% pop.) - 1.7%
Life expectancy at birth (years) - 75
GNI per capita (current US$) - $10,760
Exports (% GDP) - 80%
FDI (% GDP) - 4%
Gini coefficient - 39
Malaysia has introduced anti-corruption policies within
the last 5 years (2009-14). Examples of policies include:
Criteria for scenario country selection:
10%
High natural resources exports
(% of GDP)
5.2
Higher CPI score than
Nigeria’s (lower corruption)
50
Lower CPI rank than
Nigeria’s (lower corruption)
 2013 Prime Minister signed Election
Integrity Pledge and website launched
 Malaysian Anti-Corruption Commission
Act 2009 (MACCA)
 Financial Services Act and Islamic
Financial Services Act 2013
 Whistle-blower Protection Act 2010 (WPA)
 Personal Data Protection Act 2010
22 Impact of Corruption on Nigeria's Economy
Previous history of anticorruption policies
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PwC 23
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