Nigerians aren’t just paying more at the market, data on the correlation between inflation and the Transparency International’s corruption index show they are paying a hidden tax of corruption.
Data from four African countries, Botswana, Rwanda, Mauritius, and Nigeria, reveals a clear relationship between corruption levels and inflation outcomes. While other factors also play a role, the consequences of corruption are far-reaching and persistent.
Nigeria’s inflation stood at 21.9 percent in July, far above the single-digit rates seen in Botswana, Rwanda and Mauritius, where strong institutions and good governance help anchor prices.
The contrast underscores a stark truth: countries with weaker governance and entrenched graft face persistently higher inflation.
In Nigeria, corruption fuels excess money printing, bloated budgets, and unproductive real estate speculation , distortions that raise costs for businesses and households alike.
The result is what renowned economist, Milton Friedman, once called a “hidden tax,” one that falls hardest on the poor.
While money supply, rising costs, and supply shortages are well-known drivers of inflation, corruption is a quieter tax that remains largely ignored.
Countries that score higher on Transparency International’s Corruption Perceptions Index (CPI) tend to record lower inflation, while those with poor governance face persistently high price pressures.
In 2025, Botswana, Rwanda, and Mauritius have each recorded relatively low inflation compared with Nigeria, and their governance scores tell part of the story. Botswana’s inflation eased to just 1.1 percent by July, while Rwanda and Mauritius posted 7.2 and 5.2 percent respectively. These countries all share stronger CPI scores, Botswana and Rwanda at 57 percent, and Mauritius at 51 percent, placing them within the top 60 globally.
Nigeria, by contrast, reported inflation at 21.9 percent in July 2025, far above the others. Its CPI score is just 26 percent, ranking it 140th in the world. The disparity suggests more than coincidence: countries with stronger institutions and lower levels of perceived corruption appear better able to anchor prices, while those with weaker governance structures face persistently high inflation.
This correlation reflects Friedman’s point that inflation acts as a hidden tax, imposed without legislation. In contexts of weak governance and corruption, it falls heaviest on the poor because a larger portion of their assets is held in cash.
How corruption fuels inflation
Corruption drains public resources and forces the government into unsustainable financing choices. A striking case is that of former CBN governor Godwin Emefiele, who was indicted for diverting funds to build 753 residential duplexes in Abuja, now seized by the government. Under his watch, the CBN printed over N22 trillion through so-called “Ways and Means” financing, money not backed by productive output. This massive monetary expansion, combined with fiscal leakages, poured excess liquidity into the economy and inevitably spurred inflation.
When stolen funds are channelled into unproductive assets like luxury estates rather than infrastructure or industries, and when deficits are financed by simply creating money, the result is higher prices across the board. In this way, corruption directly feeds Nigeria’s inflationary pressures, turning fiscal mismanagement into yet another quiet tax on the poor.
Civil service corruption and systemic leakages
Ola Olukoyede, EFCC chairman, recently pointed out that corruption within the civil service fuels systemic leakages far beyond political actors. In his words: “We discovered that it is extremely difficult for a political class to steal money without the command of what we call the establishment people. Political parties will come and go, but these people are always there. In one ministry we investigated, about N33.7 billion was stolen; only N3.7 billion was traced to the minister. The rest was taken by directors of finance, procurement, and other establishment figures… statistics have shown that most houses in Asokoro, Abuja are owned by single civil servants.”
This picture highlights how entrenched corruption inflates costs across the system, from real estate distortions to budgetary leakages, and ultimately filters down as higher prices of goods and services, a quiet tax borne disproportionately by the poor.
Real estate is now the third largest sector in Nigeria at N41.27 trillion, based on the 2024 rebased GDP. Proceeds of corruption may well be fuelling inflation in the sector. House rents have doubled in most cities, while farmers are losing their lands to real estate speculation.
The cost to businesses and consumers
For businesses, corruption is yet another input cost. Companies that must bribe public officials to obtain approvals or licences rarely absorb such costs; they simply pass them on to consumers in the form of higher prices.
Distorted government spending
One of the clearest ways corruption fuels inflation is through inflated and wasteful public spending. BudgIT, a civic-tech organisation, recently accused the Nigerian Senate of inflating the 2025 national budget by inserting over 11,000 questionable projects worth N6.93 trillion. This is a textbook case of distorted government spending: resources are allocated on paper but never translate into productive infrastructure or services.
When public funds are diverted through padded budgets or ghost projects, the economy is left with poor infrastructure, higher logistics costs, and weak power supply. These inefficiencies push up the cost of moving goods and running businesses, which are then passed on to consumers as higher prices. In effect, corruption at the budgetary level inflates the economy long before goods reach the market.
President Bola Tinubu recently told investors in Brazil that in Nigeria, “no more corruption.” Fighting corruption, however, must transcend rhetoric. It requires consistent action, applied without selection bias in choosing whom to prosecute. (BusinessDay)
