ECONOMY - 16 OCT 2020

The impact of bad policing and insecurity on the economy

The impact of bad policing and insecurity on the economy
Bad policing and the Nigerian economy

What a week. 

One minute we were laughing at “how it started and how it’s going” memes, and then, like a forest fire, young Nigerians took over social media with #EndSARS protests.

How it started: video footage was released showing SARS officers attacking a young man at a hotel in Ughelli, Delta state, and making away with his vehicle. 

How it’s going: the government has come out on numerous occasions with different announcements. From disbanding SARS to accepting the five demands of protesters to a protest ban. Then, there was the arrest of at least four police officers for brutalising protesters in Surulere, Lagos state. As a bonus, Twitter’s CEO also came out in support of the #EndSARS movement and verified some frontline protesters. 

The youths are leading the charge, but police reform is an issue that every Nigerian should be concerned about. SARS might have been targeting the younger generation, but we have all been living in an insecure nation as a result of weak policing. 

To emphasise this point, we will outline how corrupt police officers and insecurity are hampering our economy. 

 

Billions in bribes 

We all know Nigeria is a corrupt country—the Corruption Perception Index ranks Nigeria 146th out of 198 countries. 

A large part of what gives us this notorious label is the prevalence of bribery—a common activity in Africa’s most populous nation. It’s not anecdotal; there is data to prove it. The National Bureau of Statistics (NBS) has conducted two surveys in the last four years on bribery and corruption in Nigeria. 

According to the bureau, people pay 117 million bribes each year—equivalent to 1.1 bribes per Nigerian adult. Worse, the average bribe size is ₦5,700, which means that Nigerians pay ₦675 billion in bribes every year. That’s more than how much we spent on maize or non-alcoholic drinks last year. 

But let’s focus on the issue of the day here. Where do most of these bribes go? The Nigerian Police Force. Last year, 33% of all Nigerians who came in contact with the police paid a bribe. And they did it an average of four times. 

As a whole, the police officers are part of the economy too so the money paid to them is not “lost”.  However, it is a misallocation of resources. The economy would be better off if consumers can spend the billions of naira on items they wish to buy instead of giving it to police officers. 

It’s like paying a tax with nothing substantial in return. 
 

A country with flexible laws 

It is widely accepted that the rule of law is critical in aiding the development of an economy. Fundamentals, which are crucial for any business,  like owning land and property, won’t be possible without the proper enforcement of laws. 

Well, the police significantly undermines the rule of law and hence Nigeria’s development. 36% of police bribes are paid to circumvent and speed up usual procedures, 29% is to avoid a fine, and 10% is for “no specific purpose”—it would be fair to conclude that this is “anything for boys” money. 

Again we see how money is misallocated. Fines that should go to the government’s revenue for spending on sectors like education and health (we hope), end up in police officers’ pockets. 

From these numbers, we can see that it’s easy to break the law if you bribe the police. But it’s worse than just avoiding fines and dodging paperwork. 3% of bribes to the police were for “bail from jail”. 

This is not the legal form of bail where the court has granted it. Here, the police officers are working illegally and accepting payments to free arrestees from jail—another blow to the rule of law. 

Sadly, the rich seem to take more advantage of this. According to the NBS data, 16% of the top 100 largest bribes  (up to ₦6 million) were for these illegal bailouts from jail. This creates an economy where wealthy criminals are protected. 

In economics, there is a theory called the “poverty trap” where the country stays at an equilibrium in which the population remains poor. The economy stays in this state with no incentive to become richer unless there is a dramatic change in the system. 

For example, a farmer might make more money if she moves to an urban city, but when she considers the transport costs, higher inflation and taxes, she decides to stay put in the village. The system is set up to remain in a poor state. 

This concept is true for corruption in Nigeria. We have settled at an equilibrium where paying bribes is the easiest or even the “best” thing to do. Moving away from this way of life has disincentives. We see it in the data—half of Nigerians who refused to pay bribes were met with "negative consequences". 

So for everyone in Nigeria, going about their daily life or doing business is inhibited because we are in an environment where billions in bribes have to be paid, and the rule of law is thrown out the window.

In this world, the economy cannot operate efficiently. All countries need to have well-functioning laws to protect assets and facilitate business activity. Agents in the economy need to know that they can purchase, invest, or make transfers of assets with protection; otherwise, they will shy away. 

If the rule of law is not strong enough, i.e. the police can be bribed to circumvent it, then this lack of protection hampers economic growth. The World Bank has used Afghanistan as an example where lack of adherence to the rule of law has hindered the country’s economic growth. 

 

Ease of doing business

It’s incredible to think that the existence of a police force can lead to higher costs for businesses. It’s unheard of in developed countries, but in a country like Nigeria, it is the norm. 

If you want to transport goods from the port, the Lagos-Benin border or across the country, it would be almost irresponsible business practice not to set aside money for police checkpoints. 

The former chairman of the Nigerian Economic Summit Group recounted how he met 32 police checkpoints between Port Harcourt and Owerri—a two-hour journey.  

It means higher costs in time and money for Nigerian companies, and you can be sure that it leads to higher prices in the economy as well. But it’s not just paying bribes that impacts businesses, the general lack of security is a deterrent for economic activity. 

Take foreign direct investment, for example. According to PwC, the most important determinant in attracting foreign investment is trade openness. It makes sense; if you’re not an open economy, foreigners can’t invest. 

But the interesting thing is that for middle-income countries, the fourth most important factor is safety and security. If the country suffers from insecurities, then investors don’t bring their dollars—a blow to Emefiele. 

 

Choking the economy

Regarding SARS, in particular, the tech ecosystem has been disproportionately affected. The police officers are infamous for targeting young individuals in the tech industry, falsely claiming that they are involved in illegal activities. In the end, they are mostly beaten up and forced to pay huge sums. It’s more like theft than a bribe. Both Yele Badamosi and Adegoke Olubusi, founders of influential startups in Nigeria, have had harrowing experiences with SARS. 

This harassment hurts the bright young individuals that are responsible for one of Nigeria’s fastest-growing sectors. The tech ecosystem is already struggling to keep its engineers from moving to Canada, and the menace of SARS has definitely influenced more departures. Another story of a Nigerian brain drain. 

Another sector where insecurity is harming activity is in the oil sector where kidnappings, oil thefts and vandalism are a recurring theme. Some International Oil Companies have had to focus on more challenging offshore ventures and divested from onshore activities because of the level of insecurity there.  

Back in 2013, Shell said it was spending over $100 million a year on security to protect staff and its properties. 

How many companies have $100 million to spend on protection?

An insecurity problem has also plagued the agriculture sector in recent years. Farmers are finding it difficult to operate without the fear of bandits. It’s detrimental to their welfare, and many have lost their lives—terrorists still killed 14 farmers this week.  

It is also hampering Nigeria’s food security efforts. The disruption frequently leads to shortages and higher prices for the rest of the economy. Last month, Bloomberg reported that the production of cassava in Katsina had plummeted as a result of bandits with machetes destroying the crop. Prices more than quadrupled. 

Unfortunately for these farmers, they are not getting the appropriate level of protection from the different security forces—the police or military. 

One popular sentiment in the current #EndSARS protests is to send SARS to Sambisa forest—the proposed home of Boko Haram—to carry on operations there instead. While the idea isn’t supposed to be taken literally, it opens up an important debate on how we allocate security units like the police across the country. 

 

The police and VIPs

The United Nations (UN) recommends that each country should have around one police officer for every 450 citizens. By this measure, Nigeria performs well. There are an estimated 370,000 police officers in the country—putting our ratio at around 400 per person. 

However, A UN paper calls Nigeria’s situation a paradox, where the country “is over-policed and under-secured”. This is down to weak enforcement and corruption, which we discussed earlier. 

What is interesting is the bias towards the rich. It is estimated that 150,000 officers are working as escorts and orderlies for the ultra-rich, leaving 230,000 thousand for the rest of the population. Once that is taken into account, then we fall below the ratio recommended by the UN. 

According to a report, a policeman could be hired for as low as ₦30,000—peanuts for the very wealthy. 

One of the fundamentals of economics is the appropriate allocation of resources to extract the maximum value from a limited supply. The Nigerian police has missed this concept.  

Giving the rich the ability to control the police force introduces inequality in the security of different individuals and areas of the country. So what we have is public security that is dependent on income, which is the opposite of what the government is supposed to provide. 

Imagine if, in all the world’s wars, there was a bias towards the rich.

The model where the government provides the army for all her citizens equally should be replicated with the police. But not in Nigeria. 

In a city like Lagos, the rich have the power to move around with police officers and camp them in the highbrow areas of Ikoyi. This means that all the negative impacts of insecurity on the economy are felt greater by the poor—the very people who need additional support. 

Economists from Maryland University found that this misallocation of the police in different areas further increases inequality as factors such as house prices and employment start to diverge. 

The problem even worsens because criminals then seize the opportunity and move to poorly policed areas. For the poor living in these areas, the crime in their immediate surroundings comes with negative economic and social benefits. Welfare is reduced as a result of crime and business activity in the area is stifled. 

Now, of course, many countries have a gap between safe and unsafe areas. However, Nigeria’s case is exacerbated due to the rich’s ability to influence this divide by hiring a quarter of the force for themselves. 

In 2015, Buhari tried to solve the problem by ordering the Inspector-General of Police to withdraw all officers from VIPs, but nothing happened. Sound familiar? 

 

A lack of trust 

There is a big question on the disorganisation of the police. The line of communication from the top has not proven to work effectively. Back in 2018, Buhari ordered the then Inspector-General of Police (IGP), Ibrahim Idris, to relocate to Benue State and deal with the herdsmen crisis. 

Two months later, the president visited Benue state only to find that the IGP was not there and embarrassingly said: “It is only now that I am hearing this. But I know that I sent him here”. 

Add this with the number of times the government has unsuccessfully disbanded or reorganised SARS in the last four years, and we get to one of the biggest problems in Nigeria: distrust. 

Nigerians don’t trust that the government can deal with the police. The same way the police themselves are not trusted—almost all individuals who face bribery incidents from the police don’t report it. 

Altogether, we have an environment where unless there is a significant change, the security problem will continue to exist—hence why Nigeria’s youth are protesting. 

In all this, though, we must remember that the impact of bad policing isn’t just billions of naira in bribes, an unequal society and a lack of trust. We have police officers that are far too comfortable with ending people's lives—and the value of that loss is too priceless to value. #EndSARS

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Tokunbo Afikuyomi, Jr.

Tokunbo Afikuyomi, Jr.

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