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Institutional Quality and Economic Growth: Evidence from Nigeria

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  • Abubakar, Sule

Abstract

This study ascertained the directional effect of institutional quality through contract intensive money and effective governance index to economic growth in Nigeria using annual time series data covering the period 1979 to 2018. The study hinges on both the Solow-Swan neoclassical growth model and Washington Consensus to provide insight on the policy necessity for institutional quality. To achieve this, the study employs both the Johansen Cointegration and Ordinary Least Square (OLS) approach. The estimated cointegration test reveals joint relationship among the variables. OLS model shows that economic growth responds positively to institutional quality (contract intensive money) and is statistically significant while effective governance index exert positive and insignificant influence on the economy. The empirical results further reveal that economic growth respond positively and negative to the effect from the variables of domestic investment and foreign direct investment but significant. Furthermore, it takes 34% for the model to adjust to equilibrium in the long-term. The findings lend support to calls for quality institutions that can ensure that both private and public enterprise functions efficiently for sustainable growth and development in Nigeria.

Suggested Citation

  • Abubakar, Sule, 2020. "Institutional Quality and Economic Growth: Evidence from Nigeria," African Journal of Economic Review, African Journal of Economic Review, vol. 8(1), January.
    • Handle: RePEc:ags:afjecr:301050
    DOI: 10.22004/ag.econ.301050
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    Citations

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    Cited by:

    1. Gibogwe, Vincent & Nigo, Ayine & Kufuor, Karen, 2022. "Institutional Quality And Economic Growth In Tanzania," MPRA Paper 115400, University Library of Munich, Germany.
    2. Davidmac O. Ekeocha & Jonathan E. Ogbuabor & Patterson C. Ekeocha & Anthony Orji, 2023. "Analysis of Sectoral Outcomes and Institutional Quality Nexus in Sub-Saharan Africa," SAGE Open, , vol. 13(4), pages 21582440231, October.
    3. James Temitope Dada & Ezekiel Olamide Abanikanda, 2022. "The moderating effect of institutions in foreign direct investment led growth hypothesis in Nigeria," Economic Change and Restructuring, Springer, vol. 55(2), pages 903-929, May.
    4. Okosu, Napoleon David, 2021. "Institutions and Economic Performance: A Critical Evaluation of the Nigeria Economy," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 5(10), pages 746-755, October.
    5. Jude Omokugbo OBASANMI & Festus Osasere IMASUEN, 2024. "The Relationship between Institutional Framework and International Trade: An Application of the Gravity Model," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(6), pages 2254-2263, June.
    6. Md. Golam Kibria & M. M. K. Toufique, 2023. "Institutional governance and quality of life: evidence from developing countries," SN Business & Economics, Springer, vol. 3(3), pages 1-20, March.
    7. Abiodun Moses Adetokunbo & Iddey Josephine Yusuf, 2024. "Economic openness, institutional quality and economic growth in Nigeria," SN Business & Economics, Springer, vol. 4(7), pages 1-21, July.
    8. Muhammad Ali Husnain & Ping Guo & Guoqin Pan & Matarr Manjang, 2024. "Unveiling the Interplay of Institutional Quality, Foreign Direct Investment, Inflation and Domestic Investment on Economic Growth: Empirical Evidence for Latin America," International Journal of Economics and Financial Issues, Econjournals, vol. 14(1), pages 85-94, January.
    9. Sule, Abubakar & Mohammed, Ibrahim Danlami & Ebeh, Eleojo Joy, 2023. "Foreign Direct Investment, Trade Openness and Economic Performance in Nigeria: Does Governance Quality Matter?," African Journal of Economic Review, African Journal of Economic Review, vol. 11(3), June.
    10. Shen Jiahao & Ridwan Lanre Ibrahim & Kazeem Ajide Bello & David Mautin Oke, 2022. "Trade facilitation, institutions, and sustainable economic growth: Empirical evidence from Sub‐Saharan Africa," African Development Review, African Development Bank, vol. 34(2), pages 201-214, June.
    11. Gibogwe, Vincent & Nigo, Ayine R.S. & Kufuor, Karen, 2022. "Institutional Quality and Economic Growth in Tanzania," MPRA Paper 115486, University Library of Munich, Germany, revised 28 Nov 2022.
    12. Wandeda, Dickson O. & Masai, Wafula & Myandemo, Samuel M., 2021. "Institutional quality and economic growth: evidence from Sub-Saharan Africa countries," African Journal of Economic Review, African Journal of Economic Review, vol. 9(4), September.

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