DO OIL RENTS ERODE INSTITUTIONS? EVIDENCE FROM NIGERIA VIA THE RENT-SEEKING CHANNEL

Resource-rich economies often exhibit institutional fragility, yet the mechanism linking oil rents to governance outcomes remains insufficiently identified. This study examines how oil rents erode institutional quality in Nigeria by explicitly modelling rent-seeking as the transmission channel using annual data (2000–2024) and an ARDL–ECM framework with mediation analysis. The results show that oil rents significantly reduce institutional quality (−0.412, p<0.01) while increasing rent-seeking (0.537, p<0.01), which in turn weakens institutions (−0.361, p<0.01), confirming partial mediation (indirect effect ≈ −0.194). These findings align with the rentier-state and conditional resource curse literature, where institutional deterioration arises from incentive distortions rather than resource abundance. Nigeria’s persistent governance weaknesses reflect entrenched rent-seeking equilibria reinforced by oil dependence. The study concludes that curbing rent extraction through transparency, fiscal accountability, and anti-corruption reforms is essential for strengthening institutional resilience.