The Asymmetric Gauge of Governance and Economic Instability in Nigeria: An Investigation Using a Non-linear Autoregressive Distributed Lag (NARDL) Model
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Abstract
The complex relationship between governance and economic performance has long been a focal point of policy analysis and economic research. Understanding this relationship is crucial in the context of Nigeria, a nation characterized by its rich natural resources yet plagued with economic instability. Hence, the study explored the asymmetric effects of governance on economic instability in Nigeria. The study employs a Non-linear Autoregressive Distributed Lag (NARDL) model to uncover evidence of these dynamics. The data spanned for 24 years (1999 to 2023). Our findings show that corruption is positive and significant, indicating that previous corruption levels significantly increase economic instability in the long run. Furthermore, Negative governance is positive and significant, suggesting a potential short-run increase in economic instability in Nigeria. However, this result further shows that previous negative governance increases fueled current economic instability in the short run with a crowd-out effect. This outcome emphasizes the complexity of economic instability, potentially requiring further investigation into additional variables. There has been a conceptual misconception in the literature on the concept of governance as a major determinant of most performance of macroeconomic variables in Nigeria without its decompositions. Hence, this study attempted to establish this relationship, by using political instability, corruption, and rule of law as proxies for governance, and found that negative governance impacts economic instability in Nigeria.
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