Does Corruption Cause Economic Growth in Nigeria?

Abstract

Corruption has been widespread in Nigeria and it has been identified as one main impediment militating against its rapid growth and development. The consequences of corruption in Nigeria have been extensive and all-embracing and this includes both direct and indirect effects such as economic distortions in tax collection, public expenditure level and composition of government spending as well as inefficiencies and waste. This obliquely scares away foreign and local investors with significant adverse effect on the economy. This study thus, using secondary data, error correction model and granger causality test, investigated the relationship between corruption and economic growth in Nigeria. The findings indicated that there is long-run relationship between the level of corruption and economic growth in Nigeria. Both the Corruption Perception Index (CPI) and Relative Corruption Rank (RCR) has positive but not statistically significant effect on economic growth in the short-run. The Granger Causality test showed that corruption in Nigeria does not granger cause economic growth however economic growth granger causes relative corruption. In contrast, there is the presence of causal relationship from economic growth to Corruption Perception Index.