Institutional Quality and Economic Performance in Nigeria

Abstract

Some country-specific and cross-country studies have suggested that the qualities of institutions are a sine qua non for sustainable economic development in developing economies. Consequently, this study attempts to validate this position by examining the relationship between the quality of institutions and the economic performance of Nigeria over the period 2000 to 2019 using time series analysis methodology. To avoid producing unreliable estimation results, the series are tested for stationarity using the Augmented Dickey-Fuller and Phillips-Perron unit root test methods. The results indicate that the variables are stationary at order I(1). The Engle-Granger co-integration technique which involves testing the residuals of the model for unit root confirms the existence of long-run relationships among the variables. Finally, the results of the ordinary least squares (OLS) estimation of the error correction model (ECM) indicate strong positive and significant relationships between institutional quality variables and the economic performance of Nigeria. It is recommended that the various arms of government in Nigeria should formulate and implement the appropriate policies that would strengthen the various institutions in the country, particularly the civil service, the police, regulatory bodies, and the judiciary, to enable them to become more efficient and to contribute more to the economic development of the country.