Impact of Institutional Quality on Inclusive Growth in Nigeria

Inclusive growth remains a critical challenge in Nigeria, as the nation grapples with persistent poverty, inequality, and unemployment despite periods of economic expansion. Understanding the role of institutional quality in fostering inclusive growth is essential, given its potential to address these systemic issues. This study empirically examines the relationship between institutional quality and inclusive growth in Nigeria from 1984 to 2020 using the Vector Error Correction Model (VECM) estimator. The findings reveal that in the short run, institutional quality negatively and significantly affects income growth and inclusive growth, although it positively influences employment. In contrast, the long-run analysis indicates that institutional quality positively contributes to income growth, income equality, and inclusive growth at a 5% significance level, while its effect on employment remains statistically insignificant. Thus, institutional quality negatively impacts inclusive growth in the short run but positively influenced growth inclusiveness in the long run. The study underscores the need for policy reforms aimed at improving public service quality and institutional effectiveness to enhance the inclusiveness of growth in Nigeria over time.