eProcurement
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
