Governance and Economic Welfare in Nigeria

This study examines the impact of governance indicators on economic welfare in Nigeria. In particular, the study investigated the effects of voice and accountability, political stability and absence of violence/terrorism, government effectiveness, regulatory quality, rule of law, and control of corruption on economic welfare. Economic welfare is  measured in terms of Hanke’s version of the misery index. Annual time-series data for the period 1996 to 2023 were used for the study. The data were sourced from the Central Bank of Nigeria annual statistical bulletin for 2023, the  World Bank worldwide governance indicators for 2023, and the World Bank development indicators (various years). A variety of econometric techniques including augmented Dickey-Fuller (ADF) unit root test, autoregressive distributed lag (ARDL) bounds test approach to cointegration, error correction mechanism (ECM) and Granger causality test was used to analyse the data. The estimated regression result indicated that voice and accountability, and rule of law have insignificant positive impact on misery index while control of corruption has significant positive impact misery index. On the other hand, political stability and absence of violence/terrorism, and government effectiveness have insignificant negative impact on misery index while regulatory quality has significant negative impact on misery. The Granger causality test indicated only one unidirectional causality from misery index to political stability and absence of violence/terrorism. The study concludes that political stability and absence of violence/terrorism, government effectiveness, and regulatory quality contribute to improvements in economic welfare while voice and accountability, rule of law, and control of corruption deteriorate economic welfare in Nigeria. Among other things, the study recommends that the Independent National Electoral Commission (INEC) and other stakeholders in Nigeria’s political arena should ensure free, fair and credibles elections that will reflect the wishes of the electorate.