“Anatomy of fraud and Corruption in Nigeria: A Search for Pandora Box and Panacea” by Prof. Emma I. Okoye - Part 1

"As businesses and society become more enlightened and complex, methods of perpetrating frauds became more sophisticated (Okoye & Akamobi, 2009). This is not a far

cry from Daniel 12: 4 … even to the time of the end, knowledge shall be increased".

PROTOCOL

The Vice Chancellor

Past Vice Chancellors

Deputy Vice Chancellors (Academic and Administration)

Past Deputy Vice Chancellors

Members of the University Governing Council

Principal Officers of the University

Deans of Faculties

Directors and Heads of Departments

Distinguished Academics and Professional Colleagues

Visiting Academics and Colleagues

My lords Spiritual and Temporal

Captains of Industry

Family Members and Friends

Gentlemen of the press and other electronic media

Great Students and friends of the University

Distinguished Ladies and Gentlemen

PREAMBLE

It is my humble privilege and pleasure to welcome you to this Inaugural Lecture on the day the Lord has made. We shall indeed rejoice and be glad in it.

I gladly give thanks, honour and glory to God Almighty, Giver of life, the paragon Omniscient, fraudless, incorruptible and accountable God for His mercies and loving kindness.

I sincerely thank our Vice Chancellor, Professor J. E. Ahaneku FAS for the authorization to apportion this day for my Inaugural lecture and the support received from the University.

I am overwhelmed with joy, but at the same time humbled that by the grace of God, I have the opportunity to deliver my Inaugural Lecture – the 32^nd in the series, twelve years after the elevation to the rank of Professor. Ideally, Inaugural Lecture is supposed to be delivered within the first two years of elevation to the Chair, but the prevailing circumstances in the University made it impossible for me to deliver my Inaugural Lecture before now. The Inaugural Lecturer has witnessed and experienced many great days in his life. The greatest of the days was the day my maker found and took hold of me – the day I gave my life to Jesus (more than three decades ago). It was an experience I do not know how to describe, honestly speaking, only personal encounter with Him (JESUS) can accurately describe it. I wish everyone seated here will have the same experience. Next to that greatest day was the day God gave me this Priceless Treasure –My Precious Wife. There are other great days of my life, which today is one of them.

Far away in Great Britain, an Eminent Professor of Accounting, William T. Baxter, delivered his Inaugural Lecture entitled “Accounting as an Academic Study” on December 2, 1947 at the London School of Economics (LSE), in the University of London. Baxter’s Chair of Accounting was the first full – time to be created in any British University. After Professor Baxter’s lecture, there was no other Inaugural Lecture in Accounting in the University of London for the next thirty three (33) years, until on February 26, 1980 when Professor Susan Dev, a former student of Baxter delivered her Inaugural Lecture titled: “Accounting and the London school of Economics’ Tradition”.

Vice Chancellor Sir, history is repeating itself to a greater extent today in Nnamdi Azikiwe University. More than twelve (12) years ago, precisely on May 19, 2004, an Eminent Professor of Accounting, Professor Benjamin C. Osisioma delivered his Inaugural Lecture entitled: “Corporate Strategic Change in Nigeria: A Search for an Accounting Perspective”. That was the first Inaugural Lecture from the Department of Accountancy and Faculty of Management Sciences. Today, the second Inaugural Lecture from the Department of Accountancy and Faculty of Management Science is being delivered by a former student of Professor Benjamin C. Osisioma. What a global coincidence!

Most of the earlier Inaugural Lectures in Accounting delivered in Nigeria Universities tended towards topics that are of immense significance to the Nigerian society at large. Besides, Inaugural Lecture in Accountancy usually revolves around thoughts the Lecturer has, alongside burning cum emerging issues and what he has done to address them. The choice of this topic: “Anatomy of fraud and Corruption in Nigeria: A Search for Pandora Box and Panacea” expresses my desire to follow the same tradition of raising issues that are not only significant in their academic content, but are also of great importance to the larger Nigerian society.

1.1         ACCOUTING AND ITS BRANCHES

Accounting is a systematic process of identifying, recording, classifying, measuring, verifying, summarizing, interpreting and communicating financial information. It is an information science used to collect, classify and manipulate financial data for organizations and individuals. It is instrumental for the determination of financial stability in organizations.

Traditionally, there are six branches of Accounting: Financial Accounting, Management Accounting, Government/Public Sector Accounting, Auditing and investigation, Taxation Laws and Accounting and Financial Management. I will like to increase the branches to seven, which will now include Household Accounting (See Fig. 1.1 below).

Fig. 1:  Branches of Accounting

Source: Researcher’s Conceptualization, (2016)

Professional Accountants are trained to be versatile and knowledgeable in all the branches of Accounting. Consequent upon this professional requirement, we have carried out researches in virtually all the branches (see appendix1), however, this Inaugural Lecture will be restricted to research works done on Fraud Management and Forensic Accounting, which are aspects of Auditing and Investigation.

1.2         INTRODUCTION

Most times, the concepts of ‘fraud and corruption’ when mentioned are treated interchangeably, and often viewed together as one even though they tend to be distinctive from each other. Traditionally both concepts are uniquely treated as separate problems since fraud is basically believed to be a business problem, while on its part, corruption is explicitly linked to politicians and public office holders. The duo of fraud and corruption can therefore be described as enemies of productivity. This is because the resulting effect of their acts is that benefits are transferred away from the people that actually deserve them to others who do not; thereby violating our idea of Justice, both in the private and public sectors.

The obvious truth is that the main driver of fraud and corruption is the innate desire for personal benefits or gains. The fact that fraud is an intentional act that leads to the perversion of the truth or the right order of handling financial resources belonging to another, by inducing other party(ies), in order to part with some valuable belongings or surrender a legal right (Okoye & Akenbor, 2009), really goes to show that something drastically positive, sincere, transparent, and timely need be done before the situation gets out of hand, leading to uncontrollable chaos.

Black Law Dictionary (1979), in Okoye, Okafor & Ijeoma (2009) defined fraud as all multifarious means which human ingenuity can devise and which are resorted to by one individual to get an advantage over another by false suggestions or suppression of truth; it includes all surprises, tricks, cunning or dissembling and any unfair way which another is cheated.

Section 8 of ICPC Act 2000 defined corruption as “money, donation, gift, loan, fee, reward, valuable security, property or interest in property being property of any description whether movable or immovable, or any other similar advantage, given or promised to any person with intent to influence such a person in the performance or non-performance of his duties.

Section 46 of the EFCC Act of 2004 termed it “economic crime” and viewed it as the non-violent criminal and illicit activity committed with the objective of earning wealth illegally either individually or in a group or organized manner thereby violating existing legislation governing the economic activities of government and its administration and includes any form of fraud, narcotic drug trafficking, money laundering, embezzlement, bribery, looting and any form of corrupt practices, illegal arms deal, smuggling, human trafficking and child labour, oil bunkering and illegal mining, tax evasion, foreign exchange malpractices including counterfeiting of currency, theft of intellectual property and piracy, open market abuse, dumping of toxic wastes and prohibited goods, etc. However, Okoye and Akamobi (2009), viewed fraud as an act of dishonesty, deceit, falsifications and manipulations perpetrated to gain undue monetary and/or non-monetary benefits. 

Osisioma (2012) defines it as giving and receiving of something of value (e.g. money, sex, gifts, etc.), whether demanded or not, to influence the receiver’s action favourably toward the giver.  Hope and Chikulo as cited in Osisioma, (2012) said that corruption is rare in Botswana, widespread in Ghana, and systemic in Nigeria. Perhaps the first lesson from Nigeria is a re-definition of what constitutes systemic corruption. Fraud becomes systemic in a society when:

·                  It becomes an industry all on its own, complete with stakeholders, investors and risk-return profile. The fraud industry is organized, with internal coordination, shared knowledge and a vertical exchange of benefits linking principals and agents. It closes off clients’ alternatives, creates a network of operatives, freezes out critics and non-corrupt agents, and shares rewards and risks among stakeholders.

·                  The system on its own grows practitioners at every level-from school to graduation, from childhood to adulthood, from micro to macro levels. There is a sustained supply of individuals and mean fellows who ensure that the system of fraud and corruption is maintained in perpetuity.

·                  People actually expect leaders to be corrupt; to be any less is regarded as too good to be true. Indeed, they are considered fools who have served in public office without accumulating ill-gotten wealth.

·                  The operation of the system actively favours the corrupt and actively discourages people with integrity and character. Thus, men who run for public office on records of excellence in character, end up miserable losers in the power game.

·                  The price tag for public office is quite high for men of character: sacrifice of personal integrity. The would-be official is expected to renounce his basic convictions and values in order to belong. The system makes out of citizens, either liars, or cheats or outright thieves.

·                  The system never holds leaders accountable; ethnic and sectional loyalties override character and competence deficiencies. Besides, the people have a very short collective memory; a man’s sordid deeds in the past are very soon forgotten and forgiven him.

In the present day Nigeria, corruption has become endemic. To this end David Cameron (the former Prime Minister of the United Kingdom), recently described Nigeria as being “fantastically corrupt”. This is because corruption is now seen as an industry in Nigeria. The questions that readily come to mind include the following: if corruption is an industry, what then constitutes the firms that make up this industry - Corruption?; Who are the employers and employees of these firms that make up the industry - Corruption?

In Nigeria, acts of fraud and corruption have become the main source of accumulating quick wealth by many. No doubt, both of them have in fact contributed negatively to the development process of Nigeria as a country. It is so sad that it has, in the words of Osisioma (2012) penetrated the warp and woof of the Nigerian society. The boss and his messenger, the Police officer and the recruit, the classroom teacher and his student, the politician and the voters, the judge and the lawyer, the pastor and his parishioner – none can remain untainted by this stigma.

The bane of financial mismanagement in the Nigeria public sector since the oil boom may have led to the existence of weak structural control mechanism that has birthed variety of loopholes, which in turn, has facilitated and sustained corrupt practices in Nigeria (Okoye, 2015).

Indeed, the unchecked vices of corruption and fraudulent practices in the public sector have become a foundational source of violent activities of many militant groups in Nigeria (Okoye, 2015). The Boko Haram in the North Eastern Nigeria, the Niger Delta Militants in the South South, and the current uproar of the pro Biafra group, MASSOB in South Eastern Nigeria, readily attest to this. Nigeria’s Due process framework is currently a mess, and the Budget Monitoring Price Intelligence Unit (BMPIU) a tool in the hands of those that have hijacked the Nigerian public service.

 In a study carried out by Transparency International, (2012), a number of institutions in Nigeria exhibit various level of corruption. The Figure 2 below shows the extent to which some institutions are perceived by the public to be affected by corruption in Nigeria:

Fig. 1.1: Perceived Corruption in Nigerian Institutions:

Source: Transparency International, (2012)

Okoye (2006) is quite optimistic that it is very difficult to judge the level of corruption and fraud prevalent in our today Nigeria, especially on the basis of available statistics which are usually based on the few prosecution cases, convictions or even reports of fraudulent activities currently being investigated by the Nigeria police or relevant anti- corruption/fraud agencies. This is in view of the fact that most of these perpetrators, even when arrested, are rarely tried or punished for the financial crime committed. 

This has been a great challenge to successive leaderships in Nigeria, even to the extent that the confidence once reposed by Nigerians on some arms of the government as well as on the integrity of those at the helm of affairs in public and private sector have been eroded (Okoye, Okafor, & Ijeoma, 2009).

1.3         The Present Situation

Corruption is a very complex and economic phenomenon that has bedeviled various countries in Africa and beyond. To a large extent, it has particularly affected policies’ implementation at varying degrees with a multiplier effect on the level of economic development of most economies, and Nigeria is not an exception.

In the present day Nigeria, as evidenced in Osisioma (2012), corruption is seen as a monster (the country’s greatest enemy) which must be eliminated by all necessary means. Yet, despite the continuous condemnation, as well as the efforts of successive governments’ to eliminate this so called “monster”, the country is yet inundated with series of reports of high profile fraud and scandalous cases of corruption. On its part, fraud which is closely related to, but differs literarily from corruption has become one of the greatest threats not only to Nigeria, but to the world economy. Globally fraud accounts for 5% of Gross Domestic Product, equivalent to about $3.8 trilllion USD (ACFE, 2015), while Organizations around the world lose an estimated 5% of their annual revenue to fraud, a figure that translates to a potential total fraud loss of more than $4 trillion USD [Transparency International, 2016]. It is a problem that has impacted on both major and small corporations as well as key financial institutions, and has affected the wider public who indirectly pay for the losses arising from fraudulent acts through increased costs of goods and services (Okoye, 2006). Indeed, no country is free from fraud and corruption.

Most times, when we talk of fraud and corruption, the minds of many quickly veer to politicians and political appointees, but disappointingly, acts of fraud and corruption pervade all sectors and surpass every nook and cranny of most countries. The problem of fraud and corruption in Nigeria is very insidious with global consequence. According to Okeyim, Ejue, and Ekanem (2013), the present magnitude of fraud and corruption in Nigeria can be traceable to the many years of military rule where due process was not observed in public procurement and contract bidding. Whatever the case is, we must note that acts of fraud and corruption are currently affecting both the private and public sectors of Nigeria.

Okoye and Alao (2008) posit that an accounting scandal is corporate misuse or misrepresentation of funds typically by top management of a corporation. In public companies, this type of creative accounting is tantamount to fraud and may warrant investigations by regulatory agencies, such as Securities and Exchange Commission (SEC). 

For instance, it is no longer news that:

Ø  Office holders do collude with companies and their subsidiaries to fix contract price/bids on multiple projects in order to effectively deprive the government or institutions of the benefits of competition and lower prices.

Ø  Kickbacks are paid to office holders or government officials in exchange for contracts on specific projects.

Ø  Political office holders/appointees employ sophisticated means to siphon high percentages of public funds and offshore same into their personal accounts in foreign countries.

Ø  Judges in various courts and top officials of constituted anti-graft agencies like the EFCC and ICPC are on daily basis accused for their roles in cases of fraud, stealing, bribery and corruption; the same offences they were constitutionally empowered to prevent, fight or prosecute

Ø  MDs, CEOs, Finance Directors, Company Secretaries and other top officials have been sacked on account of manipulation of the financial records of firms, book padding scandals and corruption

Ø  Due to their dictatorial tendencies, Deans of Faculties and Heads of Departments will intentionally prevent regular Departmental and Faculty meetings thereby diminishing the quality of service delivery of Faculty and Departmental member, which enables them to cut corners.

Ø  People alter figures of expenditure in their units and further over-invoice and/or falsify documents like receipts to back up their claims.

Ø  The staff nominal roll of institutions/parastatals/establishments are inflated every here and there culminating into what we refer to as “ghost workers” which have flooded most states of the federation

Ø  Officials receive gratification in order to influence the allocation of official quarters/residence as well as hostels accommodation within Universities

Ø  Traditional rulers now distribute chieftaincy titles to indigenes and strangers who patronize their royal palaces (pockets), without any significant contributions to the economy or well- being of their respective communities

Ø  Students even sell their accommodation spaces to highest bidders

Ø  Apart from the direct cheating in examination halls, students now write examinations by proxy.

Ø  Lecturers receive gratification and allow themselves to be induced to manipulate the scores or grades of their wards or students

Ø  Clergymen, pastors, evangelists, imams etc fraudulently fake miracles and prophecies these days in a bid to collect cash and other material benefits from unsuspecting members and miracle seekers.

………. in fact, the list is endless, and this is where we are.

The Nigerian President Muhammadu Buhari at the dawn of his present administration [2015], in a public discourse avers that Nigeria either kills corruption or corruption will kill Nigeria. Sequel to the enormity of corruption in Nigeria that will be exposed below, in my opinion, the president assertion is apt. It is increasingly becoming obvious that corruption may be one of the significant factors moving the country towards becoming a failed state and constitute a threat to its corporate existence (Nenyiaba, Osisioma & Okoye, 2015).

1.4         Motivation for the Work

As businesses and society become more enlightened and complex, methods of perpetrating frauds became more sophisticated (Okoye & Akamobi, 2009). This is not a far cry from Daniel 12: 4 … even to the time of the end, knowledge shall be increased.

The anti-corruption group, Transparency International has consistently ranked Nigeria among countries most riddled with corruption. It described Nigeria as a Gangster’s Paradise where“… you pay a bribe to see a key official in many an establishment. You pay a bribe to get a job. You pay a bribe to get the passport that is yours by birth right. If you do not give or collect bribes, you remain poor and an object of scorn despite your several degrees and cognate experience until Providence intervenes for you” (TI, 1998).

While governments at various levels and era have announced series of efforts and measures to curb, combat and eradicate/eliminate fraud and corruption in the country, we seem to have reached a crossroad where the decision for the right direction to follow to get to the promised land seem to be a mirage.  Okoye, Okaro and Okafor (2015), state that Nigeria loses enormous amount of money yearly to fraud and corporate collapse.

In our view, Nigeria is a country in crises. It is factual that fraud and corruption are as old as man and it is self-evident that the level of their sophistication is the same as that of the human society where and when they occurred, (Nenyiaba, Osisioma & Okoye, 2015). The insecurity in Nigeria brought about by Boko Haram, Niger Delta Militants, Biafra agitation are arguably consequence/effect of corruption in the country. Waziri (2011) stated that “corruption in Nigeria undermines democratic institutions, retards economic development and contributes to government instability”. 

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