Corruption and Economic Growth in Nigeria

Abstract

This study investigates the causality between corruption and economic growth in Nigeria. Johansen co-integration test, ADF unit root test, Granger causality test and Ordinary Least Square methods were employed on time series (secondary) data, covering 1990 and 2010. FDI inflow, Corruption Index, Gross Domestic Product, gross fixed capital formation, openness/globalisation of the economy and government expenditure were the variables employed. Five models were specified; the first four models examined the relationship between corruption and various economic growth determinants, while the last model examined the relationship between corruption and economic growth. The result revealed that that there was no significant relationship between corruption and the Economic Growth (GDP) determinant, openness of the economy and globalization (OEG). While economic growth and the other variables such as government expenditure (GOV), foreign direct investment (FDI), Gross capital formation (GCF) has significant relationship with corruption, thus indicating that corruption exhibited a positive relationship with economic growth (GDP). The result of Granger causality tests shows that corruption Granger cause FDI inflow, government expenditure, gross capital formation, openness and globalisation of the economy. Also, there is uni-directional causality from corruption to Economic growth (GDP). This confirms the existing arguments that the level of corruption in a country is a relevant determinant of the level of economic growth. The study therefore recommends among others  that the activities of the anti-corruption agencies in Nigeria such as the Economic and Financial Crimes Commission (EFCC) and the Independent Corrupt Practices and Related Offences Commission (ICPC) should be strengthened and that our youths need to be re-orientated on moral values.

Keywords: corruption, economic growth, co-integration, unit root test.