Effects of Corruption on E-Commerce

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EFFECTS OF CORRUPTION ON E-COMMERCE (VERSION 1)

CORRUPTION:

Corruption has crippled Nigeria to fully maximize her potentials, Nigeria has seen drop in educational standard, healthcare, basic and social amenities. This is because most of the funds budgeted for the greater good of the economy have been misused for individual greed by our leaders and people elected in public offices. Corruption is the dishonest and illegal behaviour exhibited especially by people in authority for the personal gain (transparency.org). The growing corruption in Nigeria can be traced to people holding power at the federal, state and local government levels. Ruzindana, (1999) emphasises that corruption in Africa is a problem of routine deviation from established standards and norms by public officials and parties with whom they interact. He further more identified bribery, private gain and non-existent workers (also known as ‘ghost workers’) as the different types of corruption facing Africa.

Corruption generally in Nigeria is a social problem that has attracted the interest of many scholars. However, corruption and its effect on e-commerce have experienced little attention in the country.

E-COMMERCE

Until 1998, Nigeria had only few dial-up e-mail providers and a few internet service providers (ISPs) operating on slow links in the country. Present ISPs provide online advertising opportunities, internet banking securities and Very Small Aperture Terminal (VSAT) services. E-commerce growth in Nigeria is slow but steady, the vast improvement in telecommunication services in the country as illustrated by explosion of subscribers and users of Global System for Mobile communications (GSM), it is further underscored by a surge in private telecom operators (PTOs) offering ‘Fixed wireless service’ which offer data and voice transfer.

The introduction of e-commerce service is held back by lack of public awareness on how to use the technologies. However, there has been a rapid growth in electronic cash transfer services such as western union, MoneyGram and Travelex in recent years. Electronic banking is one area of e-commerce that has proven successful in Nigeria. Virtually all banks in Nigeria offer online, real-time banking services. Moreover, banks that cannot offer these services are increasingly losing their customers are offered the flexibility of operating an account in any branch of their bank’s network.

Even though the Nigeria government has taken progressive steps in recent years to aid online buying and selling (E-commerce) surmountable challenges still remain that is killing e-commerce in Nigeria. Most of the points to be discussed if critically explored have a link to corruption, in the sense that corruption has eaten so deep in the country ranging from individuals to government officials.

‘Yahoo Yahoo’ syndrome: Many young Nigerians attribute this to lack of employment and tangible jobs to keep them busy, therefore, they involve themselves in the what is known as ‘yahoo yahoo’. ‘Yahoo Yahoo’ is an online type of fraud where mostly young men look for a way of getting hold of people’s master/credit card details to use in purchasing goods online without the owner’s consent. The perpetrators of this crime spend long hours at the cyber café surfing the net with the aid of a software to crack into peoples accounts. Some even go to the extent of using charm to avoid been caught by the necessary authorities.

The most recent one around now is employment fraud. I almost fell for one recently when I saw a job advert online for the Nigerian Navy. After clicking the web link that says ‘click here to apply’ I was taken to another page where I was supposed to pay for a voucher/pin to complete the application. However, over the years, the practice of the Military related jobs has always being for job seekers to walk into a bank and pay for the voucher/pin, but for this particular one the instruction was to pay online. I tried it, followed through the whole process, input my card details and pin, fortunately for me the bank I use had network issue so the transaction couldn’t go through, it was later that I found out it was a scam and the Nigerian Navy did not officially advertised the job on its website. We can all imagine how many poor job applicants would have fallen prey of that fraud act.

Lack of dependable online payment gateways: while things are getting better as regards e-commerce in Nigeria in the sense that in the last decade a lot of online businesses have been launched (konga, jumia, slot, etc) however, dependable gateways are hard to come by. ‘Interswitch’ and ‘etransact’ are the two major companies used as online payment platform in Nigeria. However, I think some banks are gradually joining the ‘party’.

Lack of trust: People find it difficult to trust each other; also so many people do not trust new technologies. For example, my mother has never used an Automated Teller Machine (ATM), simply because she believes she cannot hold the poor machine responsible for any error/crime committed. Similarly, I was also having a chat with a friend of recent who narrated her uncle’s ordeal. While the uncle was in the UK on vacation from Nigeria, he got an alert on his phone from his bank in Nigeria that a transaction was just made (huge amount of money) on is account, immediately he flew back home went straight to the bank for an explanation on how and why such transaction took place on his account without him authorizing it, lo and behold, the bank could not give any reasonable explanation about the transaction, did not of course refund his money back saying it was due to the customer’s carelessness. What I am trying to say in essence is that lack of trust in people and machines that facilitate e-commerce is a contributing factor to how corruption affects e-commerce in Nigeria.

Reliable Power supply: Lack of reliable power supply in the country has contributed greatly to those factors that have crippled so many businesses and e-commerce activities in Nigeria, this is because the people in charge of the power sector are greedy and due to political reason have just decided to neglect the power sector. You can imagine the president of Nigeria making some allocations to fuel and service the generator servicing the ‘presidential villa’ in the last budget. This is just to show how serious the power issue is. We can all try to imagine the state of a country’s e-commerce or businesses in general where power supply is not stable.

The recent presidential pardon granted to Diepreye Alamieyseigha the former governor of the oil-rich state of Bayelsa by President Goodluck Jonathan who was convicted for money laundering and other serious corruption offense in 2007 has questioned the transparency of the President Goodluck Jonathan’s administration. The decision undermines anti-corruption efforts in Nigeria and encourages impunity. This decision also proves to future companies or individuals looking at investing in Nigeria that the country is still not very safe thereby affecting the growth of e-commerce in country.

The problem of e-commerce in Nigeria’s is not just corruption, but failure to put in place mechanism or infrastructure that will make life easy for the citizens to work and live well in the society. Nigeria need good energy distribution, good roads, overhaul postal system, good communication networks and other social amenities, Nigeria would have been a good market place for e-commerce activities in Africa but reverse is the case.

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Effects of Corruption on E-commerce (VERSION 2)

Introduction:

In almost all developing countries of the world, commerce dominates their economic activities. Even the industrial activities are based mostly on commerce. In Nigeria, the productive/manufacturing sector is still highly dependent on import and export. The manufacturing companies rely heavily on raw materials from abroad while the primary productive sector merely produce raw and semi processed materials meant for the overseas market and consumers. Nigeria produces crude oil in abundance and almost about 90% of it is exported with very little meant for the local refineries. In very sharp contrast, more than 80% of the refined petroleum products consumed in Nigeria are imported.

From the foregoing, the importance of commerce cannot be over emphasised. Commerce is the most vibrant of all the economic activities in Nigeria. In the world today, Information Technology has made trade transactions very easy. At the comfort of one’s home or/and office, commercial transaction can take place within the twinkle of an eye. The magnitude of commercial activities taking place in Nigeria and rapid development that has taken place in the field of information technology makes it imperative to probe into the possible effects that corruption can have on e-commerce.

Whatever the situation, corruption scandals and allegations of dishonesty have great impact on commercial activities in Nigeria, high level of corruption could also impact upon economic performance in Nigeria, e-commerce inclusive.

Corruption has serious effects on e-commerce in many ways. The price and marketability of any product or service is determined significantly by the local cost of production. On the other hand, the cost of production is influenced greatly by the level and magnitude of corruption in the system. The level and magnitude of corruption affects the cost of all the factors of production which in turn affects the demand and supply of products and services covered by e-commerce. If the cost of raw materials is increased because of the incidence of over invoicing, the eventual cost of production and selling price of the finished product or service will be high. In the final analysis, the high price will affect the volume of trade involving the product or the service. That being the case, if such product or service is under e-commerce, there will be a major impact.

Money laundering is a form of corruption and it affects e-commerce in all manner of ways. Monies that are laundered are not monies worked for or genuinely earned. Such monies are spent in a way that the level of liquidity in the economy will increase and artificially the prices of products and services on which the money is spent will increase. In fact, lose money in the segment of the market dealing in those products or services will give a wrong signal of a high demand which in turn will increase prices. Definitely e-commerce will be affected, since money laundering will have effect on the forces of demand and supply.

In most developing countries, goods and services produced, marketed and consumed there are approved or certified. The process of certification or approval is often laden with corrupt practices, such that at the end products or services will affect e-commerce. In most cases because the cost of bribing the officials to grant certification is taken as part of the cost of production and also because the quality of the products and services in the long run will be discovered to be poor, there would be low demand for it. This will lead to a lot of distortions in the e-commerce market.

There is also a wide spread of misappropriation of public funds in Nigeria, just like some other countries in Africa. This massive misappropriation of public funds affects e-commerce. The demand and supply tilt towards the goods and services consumed by those that have been involved in the misappropriation of public funds. The increased demand will act as an incentive for producer to increase the quantity of such goods and services consumed by the few super rich people while those consumed by people who have no access to this misappropriated public fund as neglected.

The poor perception and attitudes of the people generally towards corruption and how poorly the government and all relevant agencies and institutions are handling cases of corruption has eroded people’s confidence and this has serious negative impact on e-commerce. E-commerce is still at very low pace in Nigeria majorly due to the effect of corruption. If one party places an order and expect the other party to mail or supply the goods before payment is effected, the supplying party would be weary that he may just supply goods to an individual he may not be able to trace eventually. On the other hand, if the order is backed with payment, the person who places the order will not be sure the supplier would supply to specification and to his/her satisfaction. I was having a chat with my dad recently, and he took me way back into the 60’s when Nigeria did not have a colour lab for printing pictures. All pictures printed then were all in ‘black and white’, however, if you want it printed in colour one needed to send the film to the United Kingdom (UK), it will printed in colour and sent back to Nigeria after which you now send the payment over to the UK. Over time, the transaction was stopped/cancelled by the UK government which I reckon was due to fraudulent activity of Nigerians not paying after receiving their pictures back.

Also the corruption in the country which does not spare the judiciary makes seeking redress in law court a tortuous exercise. In some cases, justice is to the highest bidder and when it is not, the road to justice is long and winding. A simple civil case on a contractual agreement may take years and by the time judgement is delivered, the compensation is not restorative enough.

The generality of the people that are involved in e-commerce do not see any reason or have any urge to keep accurate record of all transactions. At times, it can be due to ignorance and at times it is deliberate and intentional. Whatever be the case, the overall effect is to evade paying the required tax revenue to the appropriate government. The government that is in position to develop or encourage e-commerce through enactment of favourable policies and law may then not be interested. On the other hand, if people would pay taxes as appropriate, the government can encourage e-commerce which is still in its infancy in Nigeria.

REFERENCE

Akintola, K.G., Akinyede, R.O. and Agbonifo, C.O (2011), ‘appraising Nigeria redness for Ecommerce towards achieving vision 2020’, IJRRAS, 9(2)

Sherah Kurnia and Fei Peng (2010). Electronic Commerce Readiness in Developing Countries: The Case of the Chinese Grocery Industry, E-commerce, Kyeong Kang (Ed.), ISBN: 978-953-7619-98-5, InTech, Available from: http://www.intechopen.com/books/e-commerce/electronic-commerce-readiness-in-developing-countriesthe-case-of-the-chinese-grocery-industry

http://www.transparency.org/news/pressrelease/20130314_transparency_international_calls_on_nigerian_president_to_rescind

http://www.transparency.org/whatwedo?gclid=CLDnjKChmbgCFVMbtAod7S0AfA

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