Foreign Aid, Aid-Institutional Quality Interaction and Economic Growth in Developing Countries: Evidence from Nigeria (Published)
The study examined the effect of foreign aid and aid-institutional quality interaction on economic growth in Nigeria for the period (1981 – 2022) using FMOLS method. The result of the study shows that foreign aid (ODA) exerted positive but insignificant impact on economic growth in Nigeria, indicating that ODA is relevant to Nigeria’s economic growth but is not among the major drivers of economic growth in Nigeria. The aid-institutional quality interaction variable, the ODA interaction with corruption index (ODA*CPI), showed negative relationship with economic growth which suggests that weak institution, especially corruption, had constrained the positive effect of ODA on economic growth in Nigeria. The ODA absorptive capacity constraint (ODA2) had a negative and significant impact on economic growth which suggests the existence of inverted U-shape relationship between ODA and economic growth. The negative coefficient of absorptive capacity constraint of ODA shows that there is a critical level which beyond, further increase in ODA will impede economic growth. As for other variables, labour force (L), domestic capital (K), crude oil price (COP), financial deepening (FDP) and trade openness (TOP) had positive and significant relationship with economic growth (RGDP) in Nigeria. The coefficient of foreign direct investment (FDI) had a negative sign, implying that FDI had a negative impact on economic growth in Nigeria. It is recommended that there should be prudent utilization of ODA received, better and effective macroeconomic policies, improvement in the quality of governance and strengthening of relevant institutions to abate the problem of pervasive corruption in the country. Finally, aid fungibility should be avoided.
Keywords: Nigeria, economic growth, foreign aid, institutional quality
Fiscal Deficit, Institutional Quality and Economic Performance in Nigeria (1987-2022) (Published)
Nigeria continues to face high fiscal deficits, low institutional quality, and sluggish economic growth despite numerous efforts to enhance economic performance. While extensive research has focused on the impact of fiscal deficits on economic performance, limited attention has been given to the combined effects of fiscal deficits and institutional quality in the Nigerian context. This study investigates how fiscal deficits, institutional quality, and their interaction influence Nigeria’s economic performance from 1987 to 2022. Using GDP growth rate as a measure of economic performance, the analysis incorporates fiscal deficit, institutional quality as the independent variables and includes interest rate, inflation rate, and gross fixed capital formation as control variables. Preliminary unit root tests confirmed that the variables were integrated at orders zero and one, making them suitable for the Autoregressive Distributed Lag (ARDL) estimation approach. The results at a 5% significance level revealed that, in the long run, fiscal deficits negatively but insignificantly impacted economic performance. Similarly, in the long run, institutional quality also negatively but significantly influenced economic performance. The interactive effect of fiscal deficits and institutional quality on economic performance was negative and insignificant in both the short and long run. Diagnostic residual tests confirmed the model’s reliability. The study concluded that fiscal deficits and institutional quality, both independently and interactively, do not significantly drive economic performance in Nigeria. The study recommended targeted reforms to address fiscal deficits and institutional quality separately, alongside other macroeconomic strategies, to advance Nigeria’s economic performance.
Keywords: Economic Performance, Nigeria, fiscal deficit, institutional quality
Institutional Quality, Foreign Direct Investment and Sustainable Economic Growth in Emerging African Economies (Published)
Foreign direct investment (FDI) is an essential determinant of development for Africa. It encourages sustainable economic growth. However, in most African economies, quality of institution plays a vital role in enhancing the inflow of FDI. The objective of this study therefore is to examine the effect of institutional quality, foreign direct investments on sustainable economic growth in emerging African economies. The study employed pooleddata for 8 African countries (Nigeria, Botswana, Ghana, Kenya, Mozambique, Tanzania, Uganda and Zambia) using the panel data methodology for the period within the years 1990 and 2020. The paper adopted the fixed effect regression model based on the results of the Hausman test in estimating the effect institutional quality, FDI inflows and sustainable economic growth in emerging African economies. The variables of the model included; GDP per capita GDPPC, foreign direct investment FDI, domestic investment DOMINV, corruption perception index CPI, political stability POLSTAB and exchange rate EXR. The study found and concluded that using panel fixed effect, institutional quality, (proxy with corruption perception index CPI and political stability POLSATB) and FDI both have a significant relationship with sustainable economic growth in emerging African economies. The study therefore recommends that Governments in these nations need to create and encourage a conducive environment that will increase FDI inflows in the various sectors of the economy since the results of the study have shown its growth enhancing capability. Control of corruption and political stability has shown to aid and encourage the entrenchment of rule of law, democracy and justice. Corrupt tendencies need to be reduced to the barest minimum. Exchange rate stability is to be pursued vigorously and attained in other to attract investments (domestic and foreign)
Keywords: FDI, institutional quality, sustainable economic growth and emerging African economies.