A recent report of the United Nations Conference on Trade and Development shows that a whopping sum of $88.6 billion leave the African continent every year through money laundering. Out of this amount, Nigeria alone is reported to account for about $40.7 billion. These huge losses are directly linked to the faulty procurement of materials and services, inefficient, corrupt and opaque contract awards by the three tiers of government at Federal, State and Local levels. If the losses from the upstream and downstream petroleum sectors, mining, manufacturing, banking and finance, healthcare delivery, education, defense, aviation, shipping, transportation, works, housing etc. is added to that figure, annual losses to Nigeria alone will be something in the region of $2.5 trillion. To be added again to the losses enumerated above are those that occur in the country’s mostly innocuous supply chain operations such as royalty losses, tax evasion and hidden offshore investments associated with the export of raw gold, tin, copper, tourmaline, beryl, sapphire, emerald and such other precious stones highly sought after by manufacturers in China, USA, Europe, Japan for cutting, polishing and used for making expensive jewelries. Nigeria is the acknowledged repository and home to the best quality precious stones coveted by miners from Senegal, Ivory Coast, Burkina Faso, Gambia, China and other countries who converge on the country for their exploitation. Put together, these avoidable losses create enormous exodus of financial assets and capital from the coffers of Nigeria and is mainly responsible for the socio-political and economic instability the country has suffered since independence. When this phenomenon is extrapolated across the African continent and other developing economies across the globe, the loss suffered can go as high as $25 trillion or more on annual basis. Any economy that sustains such huge losses can never rid itself of a self-inflicted debt burden which the generosity of the developed world in aids can never cure.
The problem of over-invoicing, loss of royalty, importation of fake or sub-standard materials and the cynicism, duplicity and apparent helplessness by governments is what has therefore contributed to stunt the growth of many developing economies, unable to maintain or upgrade their infrastructure and are routinely forced to go cap-in-hand seeking help to finance their annual budgets from the developed economies. In summary, this situation is believed to be traceable to one or more of the underlisted:
1. People surreptitiously awarding contracts to themselves or to their cronies, using shadow companies and at outrageous prices.
2. Broken down procurement and contract award system allowing selfishness, nepotism, inefficiency, opaqueness and influence peddling to reign.
3. People taking advantage of the absence of State-sponsored sanction regime to import fake or sub-standard items into the country.
4. Lack of familiarity with the look and feel of some precious metals wildly distributed by nature, in Nigeria’s rock formations, in many States of the federation, which foreign nationals routinely exploit to the disadvantage of the country.
5. But by far the most widespread cause of procurement losses is the inability of Users to correctly describe and specify their requirements of materials and services. This may be attributable to sheer ignorance or mischief or both. Hiding behind poor item description to perpetrate fraud is the easiest thing to do. It’s also the type of fraud that’s always difficult to detect. For example, wrong description of a particular item of service created a price disparity of more than 11,000%; from the actual price of only N350 only, the same item is offered for the inflated price of N40,000 per unit. And people are happy to pay because of lack of knowledge.
The good news however is that, given the right tools for correct item description and specification; and with manufacturers, retailers and others in the supply chain business moving their businesses online, embracing eProcurement and exploring the potential of new ways of payment, providing multiple ways to buy and pay, as well as the flexibility in choice as to whether to buy from a particular market or retailer or not, it is clear that local and international players, including exporters, importers, logistics service providers, banks and payment platforms for goods and services will choose to do the right things and avoid the wrong. They will be empowered to insist on ethical standards, fair pricing as well as attesting to the origin, quality and propriety of imports and exports. Similarly, approving authorities who are wont to place reliance on the professionality and integrity of the Works and Procurement schedule officers will more likely choose to avail themselves the benefit of a second opinion, provided by the flawless digital experience that will be made available globally in the form of Market and Price Intelligence (MPI).
NeGSt has therefore developed the MPI platform, a digital technology solution that has improved on the provisions of the Harmonized Commodity Description and Coding System (HS) developed and maintained by the World Customs Organization based in Brussels, Belgium and having more than 280 member countries. Nigeria and most African countries are important members of this world body. But the primary focus of MPI is to promote availability, fairness and equity in the international supply chain ecosystem. It will also engender quality production and price comparability. MPI will leverage the existing relationship in globalization and common interests to access a bird’s eye view of the pricing structures and quality standards of member nation supply chain productions while providing informed professional second opinion to guide the conduct of supply chain professionals. MPI will cross-reference adopted coding structures of member countries and other internationally standardized systems of names and numbers adopted for the classification of traded products in accordance with their pricing and quality structures. One of such standardized classification tools being referenced is the Standard International Trade Classification (SITC) used across the globe for the classification of goods for the exports and imports of member countries. The SITC was promulgated in 2006 and is currently at revision four and is maintained by the United Nations. Nigeria and indeed all countries in the world will benefit immensely from the provisions of the MPI technology to ensure that correct description, specification, international classification, royalties, and standards of manufacture are maintained and that correct statutory duties and customs tariffs are calculated and paid into relevant government coffers by importers and exporters of goods, services and precious stones. Consumers will have no need to tie down scarce resources in large MRO stocks as they are able to take advantage of global stock availability, prompt supplies and logistics support.
Felix Babatunde Obada, PhD.
Executive Vice Chairman, NeGSt