For instance, a semi-state agency, related to a certain federal ministry advertises for tender/bids for the execution of capital projects. This situation benefits the political top echelon and their rich cohorts, while the less privileged, deprived and poor citizens are forced to resort to extortion in order to be able to survive.ĥThe institutionalisation of bribery can be observed in the following true-life illustrations. During the seminar it was found that extortion has become almost openly institutionalized. This generally reduces business competitiveness.ĤIn recognition of this daunting challenge, the Catholic Business Association (organized an international seminar at Abuja, in Nigeria in June 2006, to brainstorm on the theme ‘Strengthening Ethical Business Practices in The Nigerian Environment’. And even some pensioners must agree to hand over a portion of their entitlement otherwise they do not receive their pension at all! Both in the public and private sector, legitimate and ethical business is being marginalized and severely undercut by extortion.
The accused person who must pay money to the police, otherwise his ‘case’ will never be dealt with, or deductions made from workers’ salaries without their consent are also examples of extortion.
Examples include companies that must set aside equity stakes or certain portions of profit to pay off government officials for continued patronage. This is the case of extortion, which is one important dimension of corruption.ģIn the Nigerian experience, extortion is prevalent at various levels. When confronted by it, one can be placed in a situation whereby one is obliged to participate without having any choice. Corruption most commonly manifests itself as the misuse, abuse of resources, power or authority for personal advantage. This legislative approach recognizes that dimensions of corruption are numerous and multifaceted. It prohibits and prescribes punishment for corrupt practices and other related offences, like bribery and fraud. Our analysis provides explanations why extortion may be less of a problem in developed countries.1In national and international societies, transparency and accountability are the opposites of corruption and other fraudulent practices, such as extortion, bribery, unethical conducts etc., which continue to plague our societies.Ģ The Corrupt Practices and Other Related Offences Act is a federal legislation passed in 2000 in Nigeria.
We find that extortion is a more serious issue when incentives are primarily based on soft information, when the agent has a greater bargaining power while negotiating an illegal payment, or when the agent has weaker outside opportunities. Since bribery occurs when a violation is detected, the bribe is a penalty for "bad behavior", and helps somewhat in providing incentive. Even though both increase incentive cost, extortion penalizes the agent after "good behavior", while bribery penalizes the agent after "bad behavior". We show that a fear of inducing extortion may make it optimal to allow bribery, but extortion is never tolerated. By highlighting the role of team work in forging information, we present a notion of soft information that makes supervision valuable. This raises the question whether a supervisor who can engage in bribery and extortion can still be useful in providing incentives. Rewards to prevent supervisors from accepting bribes create incentives for extortion.
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