NIGERIA Country Profile

Public Procurement and Contracting

Business Corruption

Nigeria's public procurement system is reportedly prone to corrupt practices, with nearly 45% of companies in the World Bank & IFC Enterprise Surveys 2007 reporting that they expect to give gifts to public officials in order to secure a government contract. Business executives surveyed by the World Economic Forum Global Competitiveness Report 2009-2010 report that government officials in Nigeria frequently favour well-connected companies and individuals when deciding upon policies and contracts. According to the US Department of State 2009, US companies report that they are at a disadvantage when seeking government contracts. US companies bidding on government contracts further report that collusion occurs between foreign competitors and key government officials. Bureaucratic corruption is rampant, the conflict of interest legislation is not enforced, and procurement for capital projects is often subject to over-invoicing, which leaves room for improper payments to brokers, contractors and public sector officials. The government enacted the Public Procurement Act in 2007, creating a more transparent and competitive procedure for awarding public contracts and introducing a debarment procedure for corrupt companies, allowing the Bureau of Public Procurement to debar companies for no less than five years and impose fines. The BPP offers an online complaints and petitions mechanism regarding particular procurement processes.

Corruption in contracting is typically carried out through brokers or agents who obtain contracts through bribes and patronage. SMEs face problems competing for government contracts against well-connected large companies with more resources and experience in bribing public officials. In late 2007, two multinational companies, Wilbros and Siemens, were convicted both in the US and Europe for bribing public officials in Nigeria in order to obtain lucrative contracts in the country.

In February 2009, the US government charged engineering company KBR Inc in a USD 180 million scheme to bribe Nigerian officials to secure USD 6 billion in contracts, according to a February 2009 article by Reuters. Allegedly, the bribes were paid between 1994 and 2004 to secure four contracts for a KBR joint venture to build and expand Nigeria's Bonny Island liquefied natural gas terminal. Subsequently, KBR agreed to pay a USD 402 million fine to end the investigation. Nigerian government has announced that it will prosecute those Nigerian officials involved in the scandal. Companies are advised to use a specialised public procurement due diligence tool in order to mitigate the corruption risks associated with public procurement in Nigeria.

Read more on public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.

Political Corruption

Despite official legislation, Global Integrity 2008 claims that there is no effective law to monitor public officials' spending, assets and income unless one is suspected of money laundering. This means that corrupt officials in public procurement can be difficult to trace due to a lack of effective monitoring of assets declarations. The Code of Conduct Bureau (CCB) collects declarations of assets, but the effectiveness of these declarations is disputed.

According to Transparency International 2004, the tender boards have been largely ineffective and have even promoted corruption and kickbacks. The greatest success of the Independent Corrupt Practices and Other Related Offences Commission was the arrest of several former ministers in December 2003 on charges of corruption. Allegedly, an ID-card contract of USD 214 million with Sagem, a French electronics company, was inflated by USD 2.5 million. These funds were used to pay off high-ranking politicians and officials in return for awarding the contract.

In August 2008, the Economic and Financial Crimes Commission arrested former chairman of the Nigeria Ports Authority (NPA) Board of Directors and five other members of the NPA on charges of abuse of office with the intent to defraud, and illegal award of contracts worth approximately USD 700 million. Subsequently, the charges were reduced and the defendants were granted bail, according to the US Department of State 2008.

Read more on public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.

Frequency

World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give the favouritism of government officials when deciding upon policies and contracts a score of 2.3 on a 7-point scale (1 being 'always show favouritism' and 7 'never show favouritism').

- Business executives give the diversion of public funds to companies, individuals, or groups due to corruption a score of 2.3 on a 7-point scale (1 being 'very common' and 7 'never occurs').

The World Bank & IFC: Enterprise Surveys 2007:
- 44.5% of companies polled expect to give gifts to secure a government contract.

- The value of a gift expected to secure government contracts amounts to 4.6% of the contract value.