DOES INSTITUTIONAL QUALITY REDUCE POVERTY INCIDENCE IN NIGERIA?

Despite periods of economic expansion, poverty in Nigeria is persistent and this raises important concerns about the role of governance institutions in developing outcomes. This study examines the significant effect of institutional quality on poverty level in Nigeria using annual time series data between the years 1996-2023. Institutional quality is quantified by the six components of World Bank's Worldwide Governance Indicators: control of corruption; government effectiveness; political stability; quality of regulation; rule of law; and voice and accountability, whereas poverty incidence is taken as the key indicator of welfare. Using autoregressive distributed lag (ARDL) bounds-testing method in a log-linear model, the study estimates both long-run and short-run relationships. The results indicate that the role played by institutions in poverty differs among governance dimensions, with rule of law emerging as the most reliable factor in poverty reduction. In contrast, overall institutional quality has a poor explanatory power, which may suggest the combined indicators cover up the different role of individual governance factors. This study contributes to the institutions and development literature by providing specific information for Nigeria on the relationship between governance and poverty.