Dutch disease or Nigerian disease: a prima facie? New evidence from ARDL bound test analysis

It is somewhat paradoxical and counter intuitive that an increasing stock of assets in a country tend to hinder its economic growth rather than bringing about greater opportunities for economic development. This is termed “resource curse”. While many refers to it as Dutch disease, where an economy whose original exports were tradable goods, but then shift to export of booming sector, which consequently leads to a real exchange rate appreciation and the extinction of the original tradable goods exporting sector. Others refer to it as the Nigerian disease where an abundance of natural resources leads to poorer governance and conflicts, which brings about a decline in economic progress. This study, using Nigeria as a case study, employs autoregressive distributed lag (ARDL) approach to co-integration proposed by Pesaran et al. (2001). It is based on a time series data over the period 1981–2014. This study extends existing literature by focusing on the institutional quality as an influential phenomenon in economic growth. The findings diagnose Nigeria to be suffering more from the Nigerian disease which is attributable to institutional quality (i.e., corruption) than Dutch disease attributable to foreign exchange. This implies that the government should strive towards long term economic development and diversification by enhancing, among others, its institutional quality and combating corruption.