Institutional Quality and Output Performance in Nigeria
Keywords:
Institutional Quality, Output Performance, Long run Impact, Short run Impact
Abstract
This study investigates the impact of institutional quality on output performance in Nigeria using annual secondary time series data extracted from World Bank WGI database and the Central Bank of Nigeria from 1996-2021. Descriptive analysis, correlation analysis, unit root test, lag selection test, F-bounds cointegration test, and autoregressive distributed lag (ARDL) model were employed to analyze the time series data with output performance (proxied by the gross domestic product growth rate) as dependent variable, while institutional quality, gross fixed capital formation, labour force growth rate, foreign direct investment, inflation rate, and financial development were incorporated as independent variables. Findings show that all the explanatory variables except the gross fixed capital formation were significant in the long run. However, only the institutional quality and inflation rate exhibit negative impact on economic growth, while all the other explanatory variables exert positive impact on economic growth along the long run horizon. With regards to the short run, only the institutional quality, labour force growth rate, and financial development have significant impact on economic growth. Furthermore, only institutional quality and inflation rate exhibit negative relationship with economic growth, while the other explanatory variables exert positive relationship with output performance along the short run horizon. Consequently, the study recommended that the Nigerian government should adopt policies and strategies that can improve the quality of institutions in the country.
References
Abubakar, S. (2020). Institutional quality and economic growth: evidence from Nigeria. African Journal of Economic Review, 8(1), 48-64.
ACCA (2017). Can Nigeria get its economic fortune back on track www.accaglobal.com/ie/en/member/member/accountingbusiness/2017/09/insights/nigeria-economy.html
Acemoglu, D., Johnson, S & Robinson, J. (2001). The colonial origins of comparative development: An empirical investigation. The American Economic Review, 91(5), 34-49.
Acemoglu, D., Johnson, S., & Robinson, J. A. (2018). Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution. The Quarterly Journal of Economics, 117(4), 1231 - 1294.
African Development Bank. (2001). African Development Report: Africa in the world economy, fostering good governance in Africa. New York: Oxford University Press.
African Development Bank. (2014). An infrastructure action plan for Nigeria: Closing the infrastructure gap and accelerating economic transformation. Summary report, African Development Bank Group.
Alhadj, M. S. (2022). Institutional Quality and Economic Growth in Cameroon: An Application of the ARDL Approach. EuroEconomica, 1(41), 17-37.
Ali, I. (2007). Inequality and the imperative for inclusive growth in Asia. Asian Development and Control, 12(2), 231-254.
Anwana, E. O., & Affia, S. E. (2018). Economic Growth and Development in Nigeria: Which Institutions Infrastructure Matter. Journal of Business and Economic Policy, 5(1), 28-32.
Aron, J. (2000). Growth and institutions: A review of the evidence. The World Bank Research Observer. International Bank for Reconstruction and Development/the World Bank, 15(1), 99-135.
Bekaert, G., Harvey, C.R., & Lundblad, C. (2005). Does financial liberalization spur growth? Journal of Financial Economics, 5(7), 3-55.
Bloch, H. & Tang, S. H. K. (2004). Deep determinants of economic growth: Institutions, geography and openness to trade. Progress in Development Studies, 4(3), 245–255.
Bon, N. (2019). Institutional Quality and the Public Investment-Growth Relationship in Vietnam. Theoretical Economics Letters, 9, 691-708.
Central Bank of Nigeria. (2014). Proceedings of the Seminar on “exchange rate policy and economic growth in Nigeria.
Chousa, J. P., Khan, Haider, A., Melikyan, D., & Tamazian, A. (2005). Assessing institutional efficiency, growth and integration. Emerging Markets Review, 6(2), 69-84.
Easterly, W., Ritzan, J. & Woolcock, M. (2006). Social cohesion, institutions, and growth. Working paper number 94, The Center for Global Development, August. Economic Development. Journal of Monetary Economics, 50(1), 3-39.
Ejuvbekpokpo, S (2012). Cost of governance on economic development in Nigeria. Global Journal of Management and Business Research, 12(13), 73-86.
Engle, R.F. & Granger, C.W.J. (1987). Cointegration and error correction: representation, estimation, and testing. Econometrica, 55, 251–276.
Glaeser, E. L., La Porta, R., Lopez-de-Silanes, F. & Schleifer, A. (2004). Do institutions cause growth? Journal of Economic Growth, 8(3), 271-303.
Global Financial Integrity. (2018). Nigeria: potential revenue losses associated with trade mis invoicing. https://gfintegrity.org/report/nigeria-potential-revenue-losses-associated-with-trade-misinvoicing/
Goldsmith, A. (1998). Institutions and Economic Growth in Africa. Harvard Institute for International Development Discussion Paper No. 7. Cambridge, Massachusetts: Harvard University. Growth. Journal of Economic Growth, 1(2), 189-211.
Hassan A.S, Meyer, D.F & Kot, S. (2019). Effect of Institutional Quality and Wealth from Oil Revenue on Economic Growth in Oil-Exporting Developing Countries. Sustainability.
Ibrahim, A. A. (2013). Issues in security, good governance and its challenges to economic growth and development. Mediterranean Journal of Social Sciences, 4(13), 187 – 191.
Ifere, E. O., Okoi, O. B. & Bassey, C. E. (2015). Institutional quality, macroeconomic policy and economic development in Nigeria. Journal of Economics and Development Studies, 3(2), 140 145.
Iyoboyi, M. & Pedro, L. M. (2014). Institutional capacity and macroeconomic performance: empirical evidence from Nigeria. Research in Applied Economics, 6(1), 38-60.
Izilein, E.I. & Mohammed, N. (2017). Do democratic institutions and foreign direct investment affect economic growth? Evidence from Nigeria. International Journal of Development and Management Review, 12(1), 65-76.
Johansen S. (1988). Statistical analysis of cointegration vectors. Journal of Financial Economics, 57, 3-55.
Jurčić, Lj., Franc S., & Barišić, A. (2020). Impact of Institutional Quality on Foreign Direct Investment Inflow: Evidence from Croatia. Business Systems Research, 11(1), 44-58.
Kaufmann, D., Kraay, A., & Mastruzzi, M. (2003). Governance matters III: governance indicators for 1996–2002. World Bank Policy Research Working Paper No. 3106.
Kaufmann, D., Kraay, A., & Zoido-Lobatón, P. (1999). Aggregating governance indicators. World Bank Policy Research Working Paper No. 2195.
Kilishi, A.A., Mobolaji, H.I., Yaru, M.A., & Yakubu, A.T. (2013). Institutions and economic performance in sub-Saharan Africa: a dynamic panel data analysis. Journal of African Development, 15(2), 127-141.
Kostevc, C., Redek, T., & Susjan, A. (2007). Foreign direct investment and institutional environment in transition economies. Transition Studies Review, 14(1), 40–54.
Letiche, J. M. (2010). Transforming sub-Saharan Africa. Journal of Policy Modeling, 32(8), 163-175.
Mankiw, N. G., Romer, D., & Weil, D. N. (1992). A Contribution to the Empirics of Economic Growth. The Quarterly Journal of Economics, 107(2), 407-437.
Mijiyawa, A. G. (2008). Sustained economic growth: Do institutions matter, and which one prevails? Cato Journal, 28(3), 26-39.
Ministry of Budget & National Planning (2017). Economic recovery & growth plan 2017-2020. Federal Republic of Nigeria.
North, D. C. (1990). Institutions, institutional change and economic performance. Cambridge University press.
Oburota, C.S. & Ifere, E.O. (2017). Manufacturing subsector and economic growth in Nigeria. British Journal of Economics, Management and Trade, 17(3), 1-9.
Ogbuabor, J., Onuigbo, J., Orji, A., & Orji, O. (2020). Institutional Quality and Economic Performance in Nigeria: A New Evidence. International Journal of Economics and Statistics, 8(1), 38-49.
Okoi, I.E., Okoi, O.B. & Bassey, C.E. (2015). Institutional Quality, Macroeconomic Policy and Economic Development in Nigeria. Journal of Economics and Development Studies, 3(2), 140 – 145.
Olayungbo, O.D & Adediran, K.A. (2017). Effects of Oil Revenue and Institutional Quality on Economic Growth with an ARDL Approach. Energy and Policy Research, 4(1), 44-54.
Ologunla, S.E., Kareem, R.O & Raheem, K.A. (2014). Institutions and the Resource Curse in Nigeria. Journal of Sustainable Development Studies, 7(1), 36-51.
Ostrom, E. (2005). Understanding Institutional Diversity. Princeton, NJ: Princeton University Paper, World Bank. No. 4851.
Peres, M., Ameer, W. & Xu, H. (2018). The impact of institutional quality on foreign direct investment inflows: evidence for developed and developing countries. Economic Research-Ekonomska Istraživanja, 31(1), 626-644.
Pesaran, H., Shin, Y., & Smith, R. (2001). Bound testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16, 289-326.
Phillips, P.C. & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335-346.
Radzeviča, A.M. & Bulderberga, K. (2018). The role of institutional quality in economic growth: implications for the Baltic States. Unpublished Thesis in Stockholm School of Economics, SSE RIGA. Reform, 18(2), 131- 152.
Rispens, R. K. E. (2009). Modern economic growth theories and the “miracle” of the East Asian Tigers, School of Economics, Erasmus University, Rotterdam.
Rodrik, D. & Subramanian, A. (2003). The primacy of institutions. Finance and Development, 40(2), 31-34.
Rodrik, D. (2002). Institutions, integration and geography: In search of the deep determinants of economic growth. http://ksghome.harvard.edu/_.drodrik.academic.ksg/growthintro.
Romer, P. M. (1986). Increasing returns and long-run growth. The Journal of Political Economy, 94(5), 1002-1037.
Romer, P. M. (1990). Endogenous technological change. The Journal of Political Economy, 98(5), 71-102.
Rothstein, B., & Teorell, J. (2008). What is quality of government? A theory of impartial government institutions. Governance, 21(2), 165-190.
Sachs J. & Warner, A. (1997). Sources of slow growth in African economies. Journal of African Economics, 6, 335 – 376.
Sarwar, S., M. Siddiqi, W. & Butt, A. R. (2013). Role of institutions and economic growth in Asian countries. Developing Country Studies, 3(2), 41-54.
Siyakiya, P. (2017). The impact of institutional quality on economic performance: An empirical study of European Union 28 and prospective member countries. World journal of applied Economics, 3(2), 29-42.
Solow, R. M. (1956). A Contribution to the Theory of Economic Growth. Quarterly Journal of Economics, 70(1), 65–94.
Swan, T.W. (1956). Economic growth and capital accumulation. Economic Record, 32(2), 334-361.
Thorbecke, E. (2013). Institutions for inclusive growth and development in sub-Saharan Africa. A paper presented at the JICA Conference, University of London.
Ubi, P. & Udah, E. B. (2014). Corruption, institutional quality and economic performance in an emerging economy: Lessons from Nigeria. British Journal of Economics, Management and Trade, 4(11), 1708-1722.
Udah, E.B. & Ayara, N. (2014). Institutions, governance structure and economic performance nexus in Nigeria. Journal of Economics and Sustainable Development, 5(3), 78-93.
Utile, T.I., Ijirshar, V.U., & Sem, A. (2021). The impact of Institutional Quality on Economic Growth in Nigeria. Gusau International Journal of Management and Social Sciences, 4(3), 157-177.
Yusuf, M. & Malarvizhi, C.A. (2014). Institutional qualities and Nigeria’s economic growth Performance. Middle-East Journal of Scientific Research, 20(3), 308-316.
ACCA (2017). Can Nigeria get its economic fortune back on track www.accaglobal.com/ie/en/member/member/accountingbusiness/2017/09/insights/nigeria-economy.html
Acemoglu, D., Johnson, S & Robinson, J. (2001). The colonial origins of comparative development: An empirical investigation. The American Economic Review, 91(5), 34-49.
Acemoglu, D., Johnson, S., & Robinson, J. A. (2018). Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution. The Quarterly Journal of Economics, 117(4), 1231 - 1294.
African Development Bank. (2001). African Development Report: Africa in the world economy, fostering good governance in Africa. New York: Oxford University Press.
African Development Bank. (2014). An infrastructure action plan for Nigeria: Closing the infrastructure gap and accelerating economic transformation. Summary report, African Development Bank Group.
Alhadj, M. S. (2022). Institutional Quality and Economic Growth in Cameroon: An Application of the ARDL Approach. EuroEconomica, 1(41), 17-37.
Ali, I. (2007). Inequality and the imperative for inclusive growth in Asia. Asian Development and Control, 12(2), 231-254.
Anwana, E. O., & Affia, S. E. (2018). Economic Growth and Development in Nigeria: Which Institutions Infrastructure Matter. Journal of Business and Economic Policy, 5(1), 28-32.
Aron, J. (2000). Growth and institutions: A review of the evidence. The World Bank Research Observer. International Bank for Reconstruction and Development/the World Bank, 15(1), 99-135.
Bekaert, G., Harvey, C.R., & Lundblad, C. (2005). Does financial liberalization spur growth? Journal of Financial Economics, 5(7), 3-55.
Bloch, H. & Tang, S. H. K. (2004). Deep determinants of economic growth: Institutions, geography and openness to trade. Progress in Development Studies, 4(3), 245–255.
Bon, N. (2019). Institutional Quality and the Public Investment-Growth Relationship in Vietnam. Theoretical Economics Letters, 9, 691-708.
Central Bank of Nigeria. (2014). Proceedings of the Seminar on “exchange rate policy and economic growth in Nigeria.
Chousa, J. P., Khan, Haider, A., Melikyan, D., & Tamazian, A. (2005). Assessing institutional efficiency, growth and integration. Emerging Markets Review, 6(2), 69-84.
Easterly, W., Ritzan, J. & Woolcock, M. (2006). Social cohesion, institutions, and growth. Working paper number 94, The Center for Global Development, August. Economic Development. Journal of Monetary Economics, 50(1), 3-39.
Ejuvbekpokpo, S (2012). Cost of governance on economic development in Nigeria. Global Journal of Management and Business Research, 12(13), 73-86.
Engle, R.F. & Granger, C.W.J. (1987). Cointegration and error correction: representation, estimation, and testing. Econometrica, 55, 251–276.
Glaeser, E. L., La Porta, R., Lopez-de-Silanes, F. & Schleifer, A. (2004). Do institutions cause growth? Journal of Economic Growth, 8(3), 271-303.
Global Financial Integrity. (2018). Nigeria: potential revenue losses associated with trade mis invoicing. https://gfintegrity.org/report/nigeria-potential-revenue-losses-associated-with-trade-misinvoicing/
Goldsmith, A. (1998). Institutions and Economic Growth in Africa. Harvard Institute for International Development Discussion Paper No. 7. Cambridge, Massachusetts: Harvard University. Growth. Journal of Economic Growth, 1(2), 189-211.
Hassan A.S, Meyer, D.F & Kot, S. (2019). Effect of Institutional Quality and Wealth from Oil Revenue on Economic Growth in Oil-Exporting Developing Countries. Sustainability.
Ibrahim, A. A. (2013). Issues in security, good governance and its challenges to economic growth and development. Mediterranean Journal of Social Sciences, 4(13), 187 – 191.
Ifere, E. O., Okoi, O. B. & Bassey, C. E. (2015). Institutional quality, macroeconomic policy and economic development in Nigeria. Journal of Economics and Development Studies, 3(2), 140 145.
Iyoboyi, M. & Pedro, L. M. (2014). Institutional capacity and macroeconomic performance: empirical evidence from Nigeria. Research in Applied Economics, 6(1), 38-60.
Izilein, E.I. & Mohammed, N. (2017). Do democratic institutions and foreign direct investment affect economic growth? Evidence from Nigeria. International Journal of Development and Management Review, 12(1), 65-76.
Johansen S. (1988). Statistical analysis of cointegration vectors. Journal of Financial Economics, 57, 3-55.
Jurčić, Lj., Franc S., & Barišić, A. (2020). Impact of Institutional Quality on Foreign Direct Investment Inflow: Evidence from Croatia. Business Systems Research, 11(1), 44-58.
Kaufmann, D., Kraay, A., & Mastruzzi, M. (2003). Governance matters III: governance indicators for 1996–2002. World Bank Policy Research Working Paper No. 3106.
Kaufmann, D., Kraay, A., & Zoido-Lobatón, P. (1999). Aggregating governance indicators. World Bank Policy Research Working Paper No. 2195.
Kilishi, A.A., Mobolaji, H.I., Yaru, M.A., & Yakubu, A.T. (2013). Institutions and economic performance in sub-Saharan Africa: a dynamic panel data analysis. Journal of African Development, 15(2), 127-141.
Kostevc, C., Redek, T., & Susjan, A. (2007). Foreign direct investment and institutional environment in transition economies. Transition Studies Review, 14(1), 40–54.
Letiche, J. M. (2010). Transforming sub-Saharan Africa. Journal of Policy Modeling, 32(8), 163-175.
Mankiw, N. G., Romer, D., & Weil, D. N. (1992). A Contribution to the Empirics of Economic Growth. The Quarterly Journal of Economics, 107(2), 407-437.
Mijiyawa, A. G. (2008). Sustained economic growth: Do institutions matter, and which one prevails? Cato Journal, 28(3), 26-39.
Ministry of Budget & National Planning (2017). Economic recovery & growth plan 2017-2020. Federal Republic of Nigeria.
North, D. C. (1990). Institutions, institutional change and economic performance. Cambridge University press.
Oburota, C.S. & Ifere, E.O. (2017). Manufacturing subsector and economic growth in Nigeria. British Journal of Economics, Management and Trade, 17(3), 1-9.
Ogbuabor, J., Onuigbo, J., Orji, A., & Orji, O. (2020). Institutional Quality and Economic Performance in Nigeria: A New Evidence. International Journal of Economics and Statistics, 8(1), 38-49.
Okoi, I.E., Okoi, O.B. & Bassey, C.E. (2015). Institutional Quality, Macroeconomic Policy and Economic Development in Nigeria. Journal of Economics and Development Studies, 3(2), 140 – 145.
Olayungbo, O.D & Adediran, K.A. (2017). Effects of Oil Revenue and Institutional Quality on Economic Growth with an ARDL Approach. Energy and Policy Research, 4(1), 44-54.
Ologunla, S.E., Kareem, R.O & Raheem, K.A. (2014). Institutions and the Resource Curse in Nigeria. Journal of Sustainable Development Studies, 7(1), 36-51.
Ostrom, E. (2005). Understanding Institutional Diversity. Princeton, NJ: Princeton University Paper, World Bank. No. 4851.
Peres, M., Ameer, W. & Xu, H. (2018). The impact of institutional quality on foreign direct investment inflows: evidence for developed and developing countries. Economic Research-Ekonomska Istraživanja, 31(1), 626-644.
Pesaran, H., Shin, Y., & Smith, R. (2001). Bound testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16, 289-326.
Phillips, P.C. & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335-346.
Radzeviča, A.M. & Bulderberga, K. (2018). The role of institutional quality in economic growth: implications for the Baltic States. Unpublished Thesis in Stockholm School of Economics, SSE RIGA. Reform, 18(2), 131- 152.
Rispens, R. K. E. (2009). Modern economic growth theories and the “miracle” of the East Asian Tigers, School of Economics, Erasmus University, Rotterdam.
Rodrik, D. & Subramanian, A. (2003). The primacy of institutions. Finance and Development, 40(2), 31-34.
Rodrik, D. (2002). Institutions, integration and geography: In search of the deep determinants of economic growth. http://ksghome.harvard.edu/_.drodrik.academic.ksg/growthintro.
Romer, P. M. (1986). Increasing returns and long-run growth. The Journal of Political Economy, 94(5), 1002-1037.
Romer, P. M. (1990). Endogenous technological change. The Journal of Political Economy, 98(5), 71-102.
Rothstein, B., & Teorell, J. (2008). What is quality of government? A theory of impartial government institutions. Governance, 21(2), 165-190.
Sachs J. & Warner, A. (1997). Sources of slow growth in African economies. Journal of African Economics, 6, 335 – 376.
Sarwar, S., M. Siddiqi, W. & Butt, A. R. (2013). Role of institutions and economic growth in Asian countries. Developing Country Studies, 3(2), 41-54.
Siyakiya, P. (2017). The impact of institutional quality on economic performance: An empirical study of European Union 28 and prospective member countries. World journal of applied Economics, 3(2), 29-42.
Solow, R. M. (1956). A Contribution to the Theory of Economic Growth. Quarterly Journal of Economics, 70(1), 65–94.
Swan, T.W. (1956). Economic growth and capital accumulation. Economic Record, 32(2), 334-361.
Thorbecke, E. (2013). Institutions for inclusive growth and development in sub-Saharan Africa. A paper presented at the JICA Conference, University of London.
Ubi, P. & Udah, E. B. (2014). Corruption, institutional quality and economic performance in an emerging economy: Lessons from Nigeria. British Journal of Economics, Management and Trade, 4(11), 1708-1722.
Udah, E.B. & Ayara, N. (2014). Institutions, governance structure and economic performance nexus in Nigeria. Journal of Economics and Sustainable Development, 5(3), 78-93.
Utile, T.I., Ijirshar, V.U., & Sem, A. (2021). The impact of Institutional Quality on Economic Growth in Nigeria. Gusau International Journal of Management and Social Sciences, 4(3), 157-177.
Yusuf, M. & Malarvizhi, C.A. (2014). Institutional qualities and Nigeria’s economic growth Performance. Middle-East Journal of Scientific Research, 20(3), 308-316.
Published
2023-12-29
How to Cite
OLOGBENLA, P. (2023). Institutional Quality and Output Performance in Nigeria. European Journal of Science, Innovation and Technology, 3(6), 356-374. Retrieved from https://ejsit-journal.com/index.php/ejsit/article/view/344
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