Does Corruption and Institutional Quality Impede Economic Performance in Nigeria?

Abstract

This study examined the nexus between corruption, institutional quality and economic performance with the motivation to determine the extent to which economic performance is impeded by corruption and institutional quality in Nigeria. The autoregressive distribution lag (ARDL) technique was employed to test the short-run and long-run relationship among the variables of interest. The data used for the analysis were obtained from the World Development Indicators and the Central Bank of Nigeria’s Statistical Bulletin for the period 1970 to 2020. The study found that corruption has a negative and significant impact on economic performance in the long-run. In contrast, institutional quality was found to have a negative but insignificant effect on economic performance. This implies that despite the establishment of institutional structures and enactment of stringent laws to curb the menace of corruption, Nigeria still witnesses a decline in economic performance. As such, Nigeria has weak institutions and regulations to fight corruption. Contrastingly, the study revealed that human capital, trade openness and the working population exerted positive and significant impacts on economic performance. By implication, the Nigerian economy reacts positively to changes in human capital development, trade openness and working population in the long-run. This suggests that, with the availability of appropriate policies and resources, human capital development, trade openness, and working population growth have the potential to enhance Nigeria’s economic performance.