Impact of Institutional Quality on Economic Growth in Nigeria

Abstract

This study examined the influence of institutional quality on the development of Nigerian economy in the 21st century using annual time series data covering 2001 to 2019. The data for the variables were checked against unit root problems using ADF unit root test and all the variables were either integrated of I(1) or I(0). Consequently, the Pesaran, Shin, and Smith (PSS) Bounds test was employed and it confirmed the existence of a long-run relationship among the variables of the study. The Auto-Regressive Distributed Lag (ARDL) model was utilized and the study found that Institutional Quality (INSQ) exerts a significant negative influence on economic growth. The error correction term was negative and statistically significant implying that the economic growth was capable of reverting to the long-run equilibrium path slowly in event of any disequilibrium. The study recommends improvement in the quality of the country's institutions by instituting a strong fight against corruption, increased accountability and freedom of expression, improved regulatory authority, and increased government effectiveness through improved leadership selection processes.