P.S BUDGET FOR CORRUPTION

Imagine a Nigeria without corruption. A Nigeria where civil servants are paid their just dues on time, where infrastructures are maintained, where federal universities are adequately funded or where LASTMA officials stop asking the popular question, ‘Anything for your boys?’

Now that we are done laughing, let’s get back to reality and the inconvenience of corruption. It’s a well known fact that one of the annoyances of corruption are the unnecessary expenses incurred. In order to reduce the uncertainty around these, and maintain some control over your finances, these extra charges should be included in your monthly/weekly budget either as their own line item (e.g bribe) or in the line item that they relate to (e.g food and transport). However, due to double marginalisation this can be quite difficult to do.

Double marginalisation is a phenomenon where different parties in the same industry apply their own mark up to prices. The outcomes can best be explained in two scenarios.

In the first scenario, think about a well-meaning individual who has identified a solution to an issue that the government is responsible for. She knows someone who knows the PA to the local councilman. The PA (who is a sharp guy) acknowledges the good idea but asks for N50k for an introduction which is paid. The councilman also likes the idea and would like to help in facilitating this. He asks for N700k because even though he is not corrupt, the people he would need to speak to are.

Double marginalisation means that this individual is not able to anticipate the 1,300% increase between the two bribes and may not adequately plan for it. The councilman is given the money and work on the project starts. If lucky, the work would carry on without any significant hitches. If unlucky, resistance may still be met even after all that money has been spent and frustration and exasperation sets in.

The second scenario is as described by the economists Ben Olken and Patrick Barron while on a trip in Aceh, Indonesia. On the way to their destination, they passed several checkpoints and noticed that officials at checkpoints closer to their destination had more power to set higher bribes than the earlier checkpoints. They considered going back and figured out that they would have to pay bribes to the earlier officials again to get through. The challenge was to figure out if the bribe at the final checkpoint (which they had no estimate of) was significantly greater or smaller than the sum of the previous bribes.

Both scenarios show that it can be quite difficult to budget for a bribe but this should not dissuade people from doing so. I suggest you just pick a number that feels right to you, multiply it by 1,000%, add 100,000 (in whatever currency you are dealing in) and multiply it by 2,000%. Even then, this may not be sufficient but at the very least you have something set aside for those pesky charges.

7 thoughts on “P.S BUDGET FOR CORRUPTION

    1. Thanks Stephen. Regular bribes, such as police checkpoints along your daily commute, can easily be budgeted for as there is already an idea of how much they cost. However with one-offs, it’s worth setting aside a percentage of the total amount of the benefit (e.g contract amount). The goal in this case will not necessarily be to cover the entire bribe or even the bulk of it, due to the unpredictability. The goal is to set an amount aside to reduce the hit on your personal finances.

      What solutions do you have in mind?

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