Impact of Institutional Quality on Multilateral Aid in Nigeria

The linkage between quality of institutions and economic performance of nations has generated a lot of interest among scholars, due to their influence on development of many countries and effective use of resources including foreign aid from multilateral organizations. Two strands of theories emerge on the institutions-multilateral aids nexus: those for benefits of aid to growth and development; and those for harms caused by aid. The research objective is to investigate the impact of institutional quality on multilateral aid in Nigeria. To do this, the study applied auto-regressive distributed lag (ARDL) bounds testing approach. Data for the study were sourced from the ICRG data, WGI data, QoG database, Transparency International, and World Development Indicators (WDI). The findings show that institutional quality variables do not have any influence on the multilateral aid in Nigeria, except the ‘independence of judiciary’ which appeared statistically significant. In the short-run analysis, the disequilibrium in the long-run equilibrium is corrected for in the next quarter period by about 25%; almost all the variables are statistically and significantly influencing multilateral aid. It is therefore recommended that donor agencies should consider other factors that negatively influence official development assistance (ODA) such as politics, location and colonial history.