Public procurement in Nigeria: How to reform the unreformable

Adedeji Adeniran and
Adededji Adeniran
Adedeji Adeniran Director of Research - Center for the Study of the Economies of Africa
Isiaka Akande Raifu
Isiaka Akande Raifu
Isiaka Akande Raifu Research Associate - Centre for the Study of the Economies of Africa

March 21, 2024

  • Leakages, inefficiencies, and corruption in Nigeria’s public procurement systems are a drain on the country’s development finance.
  • Past attempts to reform government procurement have been ineffective due to incomplete implementation, fragmentation across the states, and a lack of political will.
  • With the recent government transition comes a new opportunity to implement more sustainable procurement reforms focused on strengthened institutions, public support, continuous adaptation, and state-level participation.
Credit: Red Confidential on Shutterstock

Irrespective of a country’s level of development, public procurement plays a pivotal role in shaping the efficacy of public service delivery and fostering a conducive environment for inclusive growth.

In the Nigerian context, deficiencies in public procurement have contributed in part to a poor level of governance and weak state capacity. This is due to the leakages, inefficiencies, and corruption that characterize government procurement. Although quantifying the scale of loss due to inadequate procurement process is challenging, Nigeria’s anti-corruption agency estimates contract and procurement fraud at approximately 2.9 trillion naira ($7.6 billion) over the period 2018 to 2020, which stood at a staggering 10% of the total budgetary allocations for that period. (Note: Total budgetary allocations calculated from the 2018 Appropriation Act, 2019 Appropriation Bill, and Appropriation Act 2020 (Amendment) Bill). To put this figure into context, this procurement loss surpasses the cumulative foreign direct investment (FDI) between 2018 and 2020 of $5.5 billion, making poor procurement management a significant drain on development finance. Hence, Nigeria’s development trajectory is intricately intertwined with getting the procurement system right.

Reforms so far and why they failed

Recognizing the deleterious development outcomes of a frail procurement system, the government has launched a series of reform initiatives over the past two decades. The most comprehensive overhaul occurred in 2007, with the overhauling of the procurement policy and institutional framework. This period witnessed the introduction of coherent policy guidelines through the enactment of the 2007 Procurement Acts and the subsequent establishment of the autonomous public procurement institution, the Bureau for Public Procurement, and the National Council on Public Procurement. More recently, the Acts underwent a significant revision in 2018, and the Nigerian Open Contracting Platform (NOCOPO) was launched in 2018 to ensure greater transparency, competition, and openness throughout the procurement lifecycle.

Clearly, the myriad reforms implemented have had modest impact, as Nigeria was ranked 150 out of 180 countries in the Transparency International 2022 corruption index, with a score of 24 out of 100—a marginal decrease from its score of 25 recorded in 2013. While there are numerous elements that contribute to the ineffectiveness of these reforms, we can distill the key challenges into three categories:

  1. Incomplete reform. Recognizing that incremental efforts would not suffice to transform the procurement landscape in Nigeria, the 2007 reform adopted a holistic approach. Notably, it recommended the establishment of the National Council on Public Procurement, comprising public and private sector stakeholders, to counteract the undue politicization of the procurement process. However, over a decade since the Acts’ passage, the council has yet to be inaugurated. Additionally, crucial reforms such as e-procurement, the inclusion of small and medium-sized enterprises (SMEs), and clear guidelines on dispute resolution have been slow to set in, thereby impeding the effectiveness of the procurement process.
  2. Fragmentation. Another key challenge in the reform process is fragmentation, particularly the observed disparity between national and subnational governments. Many states have successfully aligned their procurement practices with national laws and, in some instances, surpassed them, such as the pioneering effort in e-procurement and e-tendering in Kaduna. However, these instances are exceptional as most subnational entities lack human and institutional capacities required for sustained procurement reform. Given that subnational governments account for 36.42% of the general government allocation in 2022 alone, it is critical to achieve comprehensive procurement reform at this level to bolster better governance. (Note: 36.42% calculated from state expenditure and federal budget figures for 2022.)
  3. Political will. Arguably the most significant barrier to effective reform is a lack of political will. Incomplete reform and fragmentation both reflect aspects of this. A significant number of corruption cases that have been brought to light through the judicial system involve the exploitation of loopholes by high-ranking public officials in order to perpetuate procurement fraud. In instances that reforms have targeted value for money through competitive bidding, reality may involve only one genuine bidder, with others presenting pseudo bids. Without a firm commitment from the political class, the establishment of new policies or institutions often results in isomorphic mimicry—a mere appearance of change without substantial, tangible transformation.

While we highlight these as the top priority and also the most difficult to change, we recognize that other barriers persist, such as skill gaps, slow digitalization of the procurement process, and limited gender-responsive procurement policies.  An ongoing study by the Brookings Institution, Stellenbosch University, and the Centre for the Study of the Economies of Africa will evaluate the mechanisms to harness this low-hanging fruit.

Reforming the unreformable

In confronting the entrenched challenges within the Nigerian procurement landscape, primarily rooted in political constraints, the path forward appears both uncharted and formidable. Echoing the sentiments of Dr. Ngozi Okonjo-Iweala, the past reform efforts seem like navigating the complexities of “reforming the unreformable.” However, recognizing that sustained economic development and the pursuit of good governance will remain elusive without a comprehensive overhaul of the procurement system, it is imperative to continuously seek policy windows to attempt further reforms.

Amid the recent transition in government, a strategic policy window emerges, presenting an opportunity to reassess and recalibrate procurement reform initiatives. The potential for new interventions and individuals committed to reform to enter the sphere is more palpable, presenting a unique juncture to break the impasse.

The emergence of such reformers will not be enough without initiatives to ensure the sustainability of the reform. In this regard, the following considerations merit attention:

  • Institutional development trumps individual capacity in the pursuit of reform. The ability to carry all relevant stakeholders along in the procurement reform process will be essential. Reform is unsustainable if the objective and actions surrounding it are driven only by individuals, regardless of their position in the organizational pyramid. The reformer must replicate her values across the entire institution in terms of broad understanding of goals and actions to attain them. To achieve this, it is critical that the procurement institution establishes measurable and precise objectives, in addition to clearly defined key performance indicators. Another crucial aspect of institutionalization involves investing in the training of procurement specialists and expanding the goals of procurement beyond specialized units to ensure widespread adoption and alignment.
  • Leveraging public will and support to secure political will is crucial. Although there is widespread public support for enhanced anti-corruption measures and improved procurement practices in Nigeria, this support has not translated into robust political will, primarily due to deficiencies in transparency and accountability frameworks. Creating avenues for civil society participation and fostering greater transparency in public procurement can significantly mobilize public support. Indeed, the active scrutiny of procurement operations by civil society organizations, the media, and the public serves to bolster government accountability and control mechanisms while also offering favorable incentives to public officials. While the 2007 Procurement Act envisioned a formal role for civil society, this has not materialized effectively. For a reformer, the initial step might involve establishing informal channels for engagement with these crucial stakeholders and subsequently expanding these channels by influencing a shift in political will toward the formal institutionalization of their role.
  • Reforms must continuously evolve. The reformers must also acknowledge that a one-time reform is less likely to be effective, as it may over time lead to behavior that seems compliant but still undermines the procurement process. Therefore, procurement reform should be an ongoing and sustained effort through innovative approaches. New policies formulated and implemented should not be considered the conclusion of the reform process; rather, they should be viewed as part of an evolving cycle. Loopholes can emerge out of a well-thought-out reform. Hence, it is imperative to implement continuous, and regular reforms to consistently identify and address leaks and system deficiencies.
  • Grassroots, state-level efforts are integral. To address the issue of fragmentation in procurement reform, it is crucial to encourage reform efforts at the grassroots (states) level through technical assistance and grants. One of Nigeria’s most successful fiscal reforms has been the States Fiscal Transparency, Accountability, and Sustainability (SFTAS), a collaboration between the federal government and the World Bank. Under this initiative, states are required to implement budget transparency measures in exchange for development grants. These reforms have significantly improved transparency in budgeting at the subnational level, particularly enhancing the public procurement system. To further advance procurement reform, subnational governments, which have constitutional independence from the central government, can be incentivized to complement the federal government efforts. However, this implies the federal government leads the reform efforts. When such a coordination institution is missing, a peer learning platform, such as the Nigeria Governors Forum, might be leveraged for moral suasion for integrated public procurement reform.