1 MODULE TITLE: INTERNATIONAL BUSINESS REPORT MODULE CODE: EC7P80 PROJECT TITLE: DISENTANGLING THE RELATIONSHIP BETWEEN CORRUPTION, ECONOMIC GROWTH, FDI AND OIL PRODUCTION: CASE STUDY OF NIGERIA WORDCOUNT: 9857 DUE DATE: 19 JANUARY 2016 NAME: ISHENDINAYE SILAS KADZOMBA MA INTERNATIONAL BUSINESS LON MET ID: 14023415
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MODULE TITLE: INTERNATIONAL BUSINESS REPORT
MODULE CODE: EC7P80
PROJECT TITLE: DISENTANGLING THE RELATIONSHIP BETWEEN
CORRUPTION, ECONOMIC GROWTH, FDI AND OIL PRODUCTION:
CASE STUDY OF NIGERIA
WORDCOUNT: 9857
DUE DATE: 19 JANUARY 2016
NAME: ISHENDINAYE SILAS KADZOMBA
MA INTERNATIONAL BUSINESS
LON MET ID: 14023415
2
Abstract
Resource curse hypothesis has attracted a significant amount of attention in the existing body of research
and it is commonly used to explain the poor economic growth of some of the oil producing countries.
Corruption plays a vital role within the resource curse as it decreases efficiency of allocating resources and
managing the country as well as deters FDI inflow. The presented research study focuses on Nigerian
context and critically examines the complex relationships between corruption, economic growth, FDI and oil
production. The findings of the Pearson’s correlation test and multilinear regression analysis suggests that
corruption is the single key predictor of FDI inflow into the country and hence consequently affects the rate of
economic growth. Moreover, oil production is strongly correlated with the level of corruption supporting the
validity of the resource curse hypothesis in the context of Nigeria. Building on the systemic conceptualisation
of corruption depicted by Persson, Rothstein and Teorell (2013), this study concludes with an outline of
potential policy recommendations and areas in need of further investigation.
The main aim of the presented study is to investigate the nature of the relationship between corruption,
economic growth, FDI and oil production in the context of Nigeria. This main research aim can be broken
down into the following set of research objectives.
- To review the existing body of theoretical and empirical studies on the relationship between corruption,
economic growth, FDI and oil production
- To examine the strength and significance of correlations between corruption, economic growth, FDI and oil
production in the context of Nigeria
- To compare and contrast the uncovered relationships within Nigerian context with the dynamics in other
countries in Africa (Kenya, Tanzania, Angola, Cote d’Ivoire)
- To investigate the predictive power of corruption and economic growth in attracting FDI into Nigeria and to
propose a practical set of recommendations for policy makers based on the outcomes of the analysis
1.3 Rationale
The existing body of research has highlighted the vital role of relationships between corruption, economic
growth and FDI in the context of oil producing countries, however, the academic debate has so far failed to
reach any clear consensus on the dynamics of these factors. Moreover, although the studied topic has
attracted a significant amount of attention from the academic community, no prior research has examined all
of these factors at once. Particular streams of research focusing on the relationship between corruption and
economic growth, economic growth and oil production, and FDI and economic growth can be found within
the wider academic debate. However, numerous complex inter-relationships can be associated with these
elements and therefore highlight the need for a more systematic research into the studied topic. As a result,
both theoretical and practical contributions can be expected to emerge from the presented study. On the one
hand, the theoretical contribution can be found in the more holistic conceptual framework which outlines the
inter-relationships between corruption, economic growth, FDI and oil production. On the other hand, the
conclusions derived from this research study are expected to enhance the current level of understanding of
the role corruption plays economic growth and FDI. As a result, practical implications are expected to be
found in the particular recommendations for policy makers on how to ensure economic growth in Nigeria.
1.4 Structure
The presented research study is structured into five main chapters. The first chapter, Introduction, provides
the reader with a general background into the studied topic, clarifies research aim and objectives and
highlights the underlying rationale for this study. The second chapter, Literature Review, discusses the
existing body of both theoretical and empirical research in order to provide a firm conceptual underpinning
for the examination of the studied relationships between corruption, economic growth, FDI and oil production
in the context of Nigeria. The third chapter, Methodology, clarifies the research method used for the
purposes of the presented research study. The fourth chapter, Analysis and Discussion, follows the
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methodological approach depicted in the previous chapter and summarises the key outcomes of the
conducted statistical analysis and explores these outcomes in a more detail. Finally, the fifth and the last
chapter, Conclusion, revisits the research objectives depicted in the introductory chapter and concludes the
presented research study by emphasising practical implications, limitations and potential areas for further
research.
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2. Literature Review
This chapter of the presented research study discusses the outcomes of the conducted extensive review of
the existing body of research. Overall, the interlinks between corruption, economic growth, FDI and oil
production have attracted a considerable amount of attention from the academic community, especially
within the context of developing countries. However, no prior study has examined the joint effects of these
factors nor the overall dynamics affecting particular interrelationships. The existing body of literature however
provides valuable information in terms of both theoretical and empirical findings relating to the studied
phenomenon.
The literature review chapter itself is structured into three main sections, each focusing on a particular
stream of research depicted in the academic debate. To begin with, the first section focuses on the resource
curse hypothesis which explains the potential link between oil production and impeded economic growth.
Furthermore, the resource curse hypothesis and surrounding literature recognises the vital role of corruption
and mismanagement in the process. The second section of the literature review chapter thereby builds on
the outcomes of the discussion encompassed in the first section and evaluates the relationship between
corruption and economic growth, with a particular focus on the Nigerian context. The third section examines
the nature of the relationship between FDI and economic growth and thus completes the assessment
encompassed in the literature review chapter. Following the three main sections of this chapter, a fourth
summary section is presented which puts together the findings from within individual streams of research
and provides an overview of the theoretical and empirical underpinning for the purposes of this research
study.
2.1 Resource Curse Hypothesis
The resource curse hypothesis stems from the empirical findings which associated high abundance of
natural resources in a country with the impeded economic growth (Ling, Xiao & Zhizhong, 2014). Numerous
studies have confirmed the resource curse hypothesis, particularly in the context of oil producing developing
countries (Apergis and Payne, 2014; Satti et al., 2014; Bjorvatn, Farzanegan & Schneider, 2012; Menegaki,
2013; Osaghae, 2015). The underlying explanation has been attributed to the high level of corruption and
mismanagement which impedes the efficiency of allocating resources. Apergis and Payne (2014) highlighted
the role of institutional quality in the process, suggesting the low institutional quality exacerbates the effects
of the resource curse. Similar conclusions have been drawn by Sarmidi, Law and Jafari (2014). The authors
pointed out the specific threshold of institutional quality necessary for developing countries to translate the
abundance of natural resources into positive economic growth. Moreover, Mokammadi et al. (2014)
uncovered that this effect is particularly strong for low democracy countries which are typically characterised
by ineffective institutions. Building on the macroeconomic perspective depicted in the academic debate,
Osaghae (2015) examined the microeconomic implications of the resource curse hypothesis. The author
investigated whether the presence of natural resources in the Niger Delta region of Nigeria affects the level
of development of this particular region of the country, concluding that it has in fact impeded the relative
economic growth in comparison to other regions of the country. From a contradictory perspective, the vital
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importance of oil in economic growth of Nigeria has been pointed out by Akinlo (2012). However, further
analysis conducted by the author revealed that oil impedes the development of the manufacturing sector.
The positive effects of natural resource on the level of economic growth of developing countries has been
pointed out by Smith (2015), challenging the general consensus depicted in the academic debate. Overall,
despite the largely inconclusive evidence depicted in the existing body of research, the general policy
recommendations revolve around improving financial development and trade openness in order to stimulate
economic growth in a country (Satti et al., 2014). Table 2.1 below provides an overview of the key studies
and their findings as discussed in this section of the literature review chapter.
# Author Title Findings
1 Bjorvatn, Farzanegan & Schneider (2012)
Resource curse and power balance: Evidence from oil-rich countries
The validity of the resource curse hypothesis and the actual impact of oil abundance is mediated by the strength of the government; in a country with a weak government, significant oil reserves typically damage the national economy.
2 Akinlo (2012) How important is oil in Nigeria’s
economic growth?
Although oil has had a significant impact on economic growth in Nigeria from 1960 to 2009, its impact on the manufacturing sector is largely negative.
3 Menegaki (2013) An antidote to the resource curse: The blessing of renewable energy
Resource curse hypothesis supported for the oil industry; renewable energy however challenges this assumption.
4 Satti et al. (2014) Empirical evidence on the resource curse hypothesis in oil abundant economy
Abundance of natural resources (e.g. oil) has a negative impact on economic growth. This effect can be reversed by promoting financial development and trade openness.
5 Apergis and Payne (2014)
The oil curse, institutional quality, and growth in MENA countries: Evidence from time-varying cointegration
Improvements in institutional quality can be used to address the adverse impact of resource curse.
6 Sarmidi, Law & Jafari (2014)
Resource curse: New evidence on the role of institutions
The relationship between reserves of natural reserves and economic growth becomes positive for countries that have exceeded a specific threshold of institutional quality.
7 Mokammadi et al. (2014)
The relationship between reserves of oil endowment and economic growth from the resource curse viewpoint: A case study of oil producing countries
Resource curse hypothesis holds only in the context of low democracy countries.
8 Smith (2015) The resource curse exorcised: Evidence from a panel of countries
Contradictory evidence to resource curse hypothesis; significant discoveries of natural resources in developing countries linked to both short- and long-term effects on GDP per capita. Inconclusive evidence in terms of the impacts on employment and economic development.
9 Osaghae (2015) Resource curse or resource blessing: The case of the Niger Delta oil republic in Nigeria
Microeconomic assessment of the resource curse hypothesis in the context of the Niger Delta region provides empirical support for the hypothesis as these regions of Nigeria have been found to be less developed in comparison to other parts of the country.
Table 2.1: Overview of prior research on resource curse hypothesis
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To put it in a nutshell, a prevailing consensus in the academic debate supports the validity of the resource
curse hypothesis in the context of oil-producing developing countries. As a result, the abundance of natural
resources in Nigeria can be associated with a negative impact on the level of economic growth. The
underlying explanation pointed out in the resource curse literature revolves around corruption and
mismanagement both of which impede the effectiveness of the country’s management. The following section
of the literature review chapter builds on the existing body of research on the relationship between corruption
and economic growth and thus extends the discussion encompassed in this section.
2.2 Corruption
Transparency International (TI) defined corruption as the abuse of entrusted power for private gain” and
classified corruption as ‘grand’, ‘petty’ or ‘political’. Every year TI publishes a Corruption Perception Index
(CPI) that “measures perceived levels of Public Sector Corruption Worldwide” (transparency.org, 2014). The
published index ranks countries by how corrupt their public officers are and uses a scale of 0 to 100 where
the lower the country is on the scale, the less corrupt their public officers are. The 2013 Index rates Somalia
as being the most country in the world while Nigeria is the 126th most corrupt country.
Building on the discussion encompassed in the previous section of the literature review chapter, corruption
can be associated with a negative impact on the level of economic growth. The underlying explanation has
been provided by Park (2012) who revealed that corruption decreases the quality of private investments,
leading to a general decrease of the economic growth. Similar conclusions can be found in the work of
Agbiboa (2012) who highlighted the role of corruption in the poor performance of Nigerian economy. From a
microeconomic perspective, Osaghae (2015) also pointed out corruption as the key impediment preventing
economic growth of Nigeria. The general consensus in the academic debate thereby suggests that
corruption represents the single most important challenge for Nigeria (Uma, 2013). Anti-corruption policies
have been at the centre of political agenda in Nigeria over the last few years, however, no significant positive
effects of these strategies can be observed. From a critical perspective, Persson, Rothstein and Teorell
(2013) argued that this apparent failure of anti-corruption initiatives can be found in the failure to properly
conceptualise the phenomenon. Whilst the dominant strategies have assumed that corruption represents a
mere principal-agent problem, Persson, Rothstein and Teorell (2013) argued that it is a collective action
problem requiring a different set of strategies in order to address it.
A number of researchers have linked economic growth with addressing the level of corruption in a country
(Bai et al., 2013; Yusuf et al., 2014). An alternative point of view can be found in the “grease the wheels”
hypothesis proposed by Dreher and Gassebner (2011). The authors suggested that corruption actually
facilitates firm entry and thereby stimulates economic growth in highly regulated economies. Empirical
support for this argument has been presented by Huang (2016) in the context of South Korea. Table 2.2
below provides an overview of the key studies discussed in this section of the literature review chapter.
Greasing the wheels? The impact of regulations and corruption on firm entry
In the context of highly regulated countries, corruption can be linked with “grease the wheels” hypothesis and in fact stimulates FDI and economic growth.
2 Park (2012) Corruption, soundness of the banking sector, and economic growth: A cross-country study
Corruption impedes the allocation of bank’s funds and affects the quality of private investment leading to a decrease in economic growth.
3 Agbiboa (2012) Between corruption and development: The political economy of state robbery in Nigeria
There is a direct significant relationship between corruption and under-development; poverty and slow economic growth in Nigeria can be attributed to high levels of corruption.
4 Okada and Samreth (2012)
The effect o foreign aid on corruption: A quantile regression approach
Foreign aid has been linked with a positive effect on reducing the level of corruption in a country.
5 Freckleton, Wright & Craigwell (2012)
Economic growth, foreign direct investment and corruption in developed and developing countries
In the context of developing countries, the level of corruption mediates the extent to which FDI translates into economic growth.
6 Persson, Rothstein & Teorell (2013)
Why anticorruption reforms fail: Systemic corruption as a collective action problem
The typical conceptualisation of the corruption in terms of the principal-agent problem is inapplicable to the Nigerian context as the corruption resembles more closely a collective action problem. The authors attributed this explanation to the apparent failure of government’s anti-corruption attempts so far.
7 Bai et al. (2013) Does economic growth reduce corruption? Theory and evidence from Vietnam
Economic growth has a positive effect on addressing the level of corruption in a country.
8 Uma (2013) Corruption, economic development and emerging markets: Evidence from Nigeria
Corruption represents one of the most significant challenges impeding the level of economic growth and development in Nigeria.
9 Adenike (2013) An economic analysis of the impact of corruption on economic growth in Nigeria
High levels of corruption impede economic growth in Nigeria and hence, it needs to be addressed in order to stimulate the national economy.
10 Yusuf et al. (2014) Corruption, poverty, and economic growth relationship in the Nigerian economy
Economic growth reduces corruption in Nigeria.
11 Osaghae (2015) Resource curse or resource blessing: The case of the Niger Delta oil republic in Nigeria
Microeconomic perspective on the level of economic growth in Nigeria revealed that corruption and mismanagement in local governments in the Niger Delta region as well as general government deteriorate the performance of the region in comparison to other parts of the country.
12 Huang (2016) Is corruption bad for economic growth? Evidence from Asia-Pacific countries
Anti-corruption policies may in fact undermine economic development of the country. Examples can be made of South Korea where corruption has a positive effect on economic growth and China where economic growth leads to corruption.
Table 2.2: Overview of prior research examining the impact of corruption on economic growth
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To sum up, Nigeria has been historically associated with a high level of corruption and existing body of
research has associated this endemic level of corruption with negative impacts on economic growth of the
country. Freckleton, Wright and Craigwell (2012) went even further and argued that it reduces the positive
impacts of FDI on economic growth. The critical perspective depicted in the academic debate however
suggests that anti-corruption strategies may not be an effective way to stimulate economic growth due to two
particular reasons. On the one hand, these initiatives tend to be based on an improper conceptualisation of
corruption, rendering the anti-corruption practices ineffective. On the other hand, “grease the wheels”
hypothesis supported by empirical findings suggests that corruption can have under specific circumstances a
positive impact on the country’s level of economic growth. The following section of the literature review
chapter examines FDI and its impact on economic growth and thus completes the theoretical examination of
the studied factors within the scope of this research study.
2.3 Foreign Direct Investment (FDI)
FDI can be associated with three particular positive impacts on economic growth in a country. First, FDI
supplements domestic investment and thereby allows the national economy to grow even if the domestic
capital is insufficient or unavailable (Yaqub, Adam & Ayodele, 2013). Secondly, FDI generates employment
and thus increases the purchasing power of the population (Yaqub, Adam & Ayodele, 2013). The third and
the final contribution of FDI to a nation’s economic growth can be found in the transfer of technology (Yaqub,
Adam & Ayodele, 2013).
Empirical body of research has supported the positive impact of FDI on country’s economic growth as
measure by real GDP (Freckleton, Wright & Craigwell, 2012; Umoh, Jacob & Chuku, 2012; Okoro and Atan,
In practical terms, Idoko, Idachaba and Emmanuel (2015) concluded that a 1% increase in FDI enhances
real GDP by 10%, thus highlighting the need for attracting FDI in order to stimulate a country’s economic
growth. From a critical perspective, Yaqub, Adam and Ayodele (2013) however challenged these
conclusions for Nigeria and argued that the linkage between FDI and economic growth has been largely
inconclusive.
Further examination of the relationship between FDI and the level of economic growth conducted by Inekwe
(2013) distinguished two particular effects of FDI based on the particular sector. On the one hand, FDI into
servicing (e.g. oil industry) has been linked with a positive impact on economic growth. On the other hand
however, FDI into manufacturing sector has been associated with a negative impact on economic growth.
As shown in Table 2.3 below, the practical policy recommendations depicted in the academic debate revolve
primarily around creating greater trade openness to attract FDI (Umoh, Jacob & Chuku, 2012) and
addressing the high levels of corruption in order to ensure that FDI translates into economic growth
(Freckleton, Wright & Craigwell, 2012).
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# Author Title Findings
1 Freckleton, Wright & Craigwell (2012)
Economic growth, foreign direct investment and corruption in developed and developing countries
In both short- and long-term, FDI has a direct positive effect on economic growth in a country.
2 Umoh, Jacob & Chuku (2012)
Foreign direct investment and economic growth in Nigeria: An analysis of the endogenous effects
A strong correlation between FDI and economic growth has been uncovered in the context of Nigeria within the studied period from 1970 to 2008.
3 Kehinde, Adeyeke & Andrew (2013)
A cost-benefit analysis of foreign direct investment inflows into Nigeria
Based on the examination of the performance of Nigerian economy in the period from 1970 to 2009, the authors highlight a positive impact of FDI on the level of economic growth (measured as real GDP).
4 Yaqub, Adam & Ayodele (2013)
Foreign direct investment and economic growth in Nigeria: An empirical analysis
Although in theory the FDI is expected to have a positive impact on the country’s development as it supplements domestic investment and generates employment, the empirical evidence from Nigeria is inconclusive resulting in a weak relationship between FDI and real GDP.
5 Inekwe (2013) FDI, employment and economic growth in Nigeria
In the context of Nigeria, FDI in manufacturing has been linked with a positive impact on employment rate, however, a negative influence on economic growth. Contradictory relationship exists for FDI into servicing industry (e.g. oil).
6 Okoro and Atan (2014)
An investigation of the impact of foreign direct investment on economic growth in Nigeria: A rigorous approach
The authors openly criticised the methodological reliability of the research methods used in prior research to assess the link between FDI economic growth. Consequent rigorous testing revealed a positive impact of FDI on the level of economic growth in Nigeria.
7 Idoko, Idachaba & Emmanuel (2015)
The effects of foreign direct investment on sustainable development in Nigeria
In aggregate terms for Nigeria, a 1% increase in FDI translates into 10% increase in real GDP, thus demonstrating the significant and positive effect of FDI on the level of economic growth.
8 Adamu, Idi & Hajara (2015)
FDI and economic growth nexus: Empirical evidence from Nigeria (1970-2012)
FDI has a considerable positive impact on the level of economic growth in the context of Nigeria.
Table 2.3: Overview of prior research assessing the influence of FDI on economic growth
2.4 Summary
Overall, the review of the existing body of literature encompassed in this chapter of the presented research
study has highlighted the complex dynamics between corruption, economic growth, FDI and oil production.
Inconclusive and often contradictory findings can be found in the academic debate, enhancing the need for
further research in order to better understand the studied phenomenon. Furthermore, no prior study has
examined the joint effects of the four factors at once as the focus was predominantly put on examining the
relationships between pairs of these factors (e.g. economic growth and corruption; economic growth and
FDI; economic growth and oil production). This research study thereby builds on the existing body of
research and uses statistical methods (as will be discussed in the following chapter) in order to critically
examine the complex nature of the relationships between corruption, economic growth, FDI and oil productio
in the context of Nigeria.
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3. Methodology
This chapter of the presented research study outlines the research strategy and method used for the
examination of the complex nature of the relationships between corruption, economic growth, FDI and oil
production in the context of Nigeria. The chapter itself is structured into four main sections, each focusing on
a particular element of the methodological approach: research strategy, research method, data reliability and
data analysis.
3.1 Research Strategy
The presented study relies on a case study approach focusing primarily on the context of Nigeria. The
rationale behind the selection of this case study country can be found in its dependence on revenues from oil
and gas industry to fuel the national economy as well as historically high levels of corruption. Building on the
phenomenological research philosophy, the study recognises the vital importance of contextual factors
affecting the dynamics of the studied phenomenon (Lewis, Thornhill & Saunders, 2007). For the purposes of
the presented research study, four key variables will be included into analysis, namely level of corruption,
GDP per capita, FDI inflow and oil production levels.
3.2 Research Method
To begin with, the level of corruption will be assessed with reference to the index provided by Transparency
International (transparency.org, 2014). This index reflects a perceived extent of corruption in a country and is
assessed on a scale from 1 to 10. Secondly, available data from Google Public Data (2015) will be used to
retrieve values for GDP per capita and FDI inflow. Since the first corruption index for Nigeria has been
established in 1996, the studied period ranges from 1996 to 2013. The third and the final source of the data
comes from Index Mundi (2015) which provides aggregate volumes of oil produced according to countries.
In addition to the dataset for the studied case study country (Nigeria), additional oil producing (Angola, Cote
d’Ivoire) as well non-oil producing (Kenya, Tanzania) countries in Africa will be included in the analysis in
order to investigate the extent to which conclusions drawn about Nigeria can be extrapolated to other
countries in the region.
3.3 Data Reliability
There is the myth that corruption cannot be measured and the available data is vague and subjective rather
than specific. Kaufmann et al. ((2005) debunked these myths while providing about 22 different data sources
that provide perception data on corruption. They believed that corruption can be measured by gathering
informed views from relevant stake holders and by tracking countries’ institutional features. This was also
followed through by Transparency International in that their Corruption Perception Index is based on expert
opinion from around the world. Transparency International in its 2014 report suggests that leading financial
The hypothesised relationship between the country’s economic growth and FDI inflow has been confirmed
by the conducted multilinear regression analysis. Based on the outcomes of the statistical analysis, the level
of FDI inflow explains 55.5% of the variation in the GDP per capita (indicator of economic growth).
4.3 Discussion
Overall, the conducted statistical analysis has uncovered a number of relationships between the level of
corruption, economic growth, FDI and oil production. To begin with, the validity of the resource curse
hypothesis for Nigeria has been confirmed as a strong and statistically significant correlation has been
uncovered between the level of oil production and the perceived level of corruption. Building on the notion
that corruption inhibits economic growth, the resource curse hypothesis can be considered confirmed in the
context of Nigeria. Secondly, perceived level of corruption is the key predictor of FDI inflow into the country.
In line with the existing body of research which has associated the level of corruption with a mediating effect
on the relationship between FDI and economic growth, this finding supports a number of propositions
depicted in the academic debate, as summarised in Table 4.14 below.
# Author Title Findings
1 Dreher and Gassebner (2011)
Greasing the wheels? The impact of regulations and corruption on firm entry
In the context of highly regulated countries, corruption can be linked with “grease the wheels” hypothesis and in fact stimulates FDI and economic growth.
2 Park (2012) Corruption, soundness of the banking sector, and economic growth: A cross-country study
Corruption impedes the allocation of bank’s funds and affects the quality of private investment leading to a decrease in economic growth.
3 Agbiboa (2012) Between corruption and development: The political economy of state robbery in Nigeria
There is a direct significant relationship between corruption and under-development; poverty and slow economic growth in Nigeria can be attributed to high levels of corruption.
4 Okada and Samreth (2012)
The effect o foreign aid on corruption: A quantile regression approach
Foreign aid has been linked with a positive effect on reducing the level of corruption in a country.
Excluded Variablesa
Model Beta In t Sig.
Partial
Correlation
Collinearity
Statistics
Tolerance
1 NIGERIAco
rruption .398b 1.331 0.203 0.325 0.279
NIGERIAoil .310b 1.668 0.116 0.396 0.680
a. Dependent Variable: NIGERIAgdp
b. Predictors in the Model: (Constant), NIGERIAfdi
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5 Freckleton, Wright & Craigwell (2012)
Economic growth, foreign direct investment and corruption in developed and developing countries
In the context of developing countries, the level of corruption mediates the extent to which FDI translates into economic growth.
6 Persson, Rothstein & Teorell (2013)
Why anticorruption reforms fail: Systemic corruption as a collective action problem
The typical conceptualisation of the corruption in terms of the principal-agent problem is inapplicable to the Nigerian context as the corruption resembles more closely a collective action problem. The authors attributed this explanation to the apparent failure of government’s anti-corruption attempts so far.
7 Bai et al. (2013) Does economic growth reduce corruption? Theory and evidence from Vietnam
Economic growth has a positive effect on addressing the level of corruption in a country.
8 Uma (2013) Corruption, economic development and emerging markets: Evidence from Nigeria
Corruption represents one of the most significant challenges impeding the level of economic growth and development in Nigeria.
9 Adenike (2013) An economic analysis of the impact of corruption on economic growth in Nigeria
High levels of corruption impede economic growth in Nigeria and hence, it needs to be addressed in order to stimulate the national economy.
10 Yusuf et al. (2014) Corruption, poverty, and economic growth relationship in the Nigerian economy
Economic growth reduces corruption in Nigeria.
11 Osaghae (2015) Resource curse or resource blessing: The case of the Niger Delta oil republic in Nigeria
Microeconomic perspective on the level of economic growth in Nigeria revealed that corruption and mismanagement in local governments in the Niger Delta region as well as general government deteriorate the performance of the region in comparison to other parts of the country.
12 Huang (2016) Is corruption bad for economic growth? Evidence from Asia-Pacific countries
Anti-corruption policies may in fact undermine economic development of the country. Examples can be made of South Korea where corruption has a positive effect on economic growth and China where economic growth leads to corruption.
28
5. Conclusion
The aim of the presented research study was to critically examine the complex nature of the relationships
between corruption, economic growth, FDI and oil production in the context of Nigeria. The analysis and
discussion encompassed in the presented paper relied on both the review of existing body of literature and
statistical analysis using descriptive as well as inferential methods. The outcomes of the presented research
study can be summarised in accordance with the research objectives set out in the introductory chapter.
RO1: To review the existing body of theoretical and empirical studies on the relationship between corruption,
economic growth, FDI and oil production.
The review of the existing body of literature encompassed in this chapter of the presented research study
has highlighted the complex dynamics between corruption, economic growth, FDI and oil production.
Inconclusive and often contradictory findings can be found in the academic debate, enhancing the need for
further research in order to better understand the studied phenomenon.
RO2: To examine the strength and significance of correlations between corruption, economic growth, FDI
and oil production in the context of Nigeria.
Overall, the outcomes of the conducted Pearson’s correlation test highlight the vital role of corruption in
determining economic growth as well as FDI inflow. Moreover, the correlation between the level of corruption
and oil production as well as between oil production and economic growth supports the resource curse
hypothesis.
RO3: To compare and contrast the uncovered relationships within Nigerian context with the dynamics in
other countries in Africa (Kenya, Tanzania, Angola, Cote d’Ivoire).
In all three oil producing countries (Nigeria, Angola, Cote d’Ivoire), the conducted Pearson’s correlation test
revealed a statistically significant correlation between the level of oil production and perceived level of
corruption. This finding provides substantial empirical support for the validity of the resource curse
hypothesis in the context of oil producing African countries. Moreover, a strong correlation has been found in
all cases between the level of economic growth (GDP per capita) and FDI inflow. However, the correlation
was negative in the case of Angola, suggesting an inverse type of relationship in this context in comparison
to other countries included in the analysis. Overall, the contradictory findings derived from the series of
Pearson’s correlation tests suggest that the nature of the relationships between corruption, economic growth,
FDI and oil production is largely context-dependent.
RO4: To investigate the predictive power of corruption and economic growth in attracting FDI into Nigeria
and to propose a practical set of recommendations for policy makers based on the outcomes of the analysis
29
The conducted multilinear regression analysis revealed that the perceived level of corruption is the single
key predictor of FDI inflow into Nigeria. This variable alone accounts for 86.5% of the variation in the
dependent variable. As a result, the inferential statistical test has confirmed the observations depicted in the
descriptive statistical analysis section and the level of corruption has a significant impact on the level of FDI
inflow into Nigeria. As the level of FDI inflow is predicted by the perceived level of corruption and FDI inflow
translates into economic growth, addressing corruption should be the principal focus of the policy makers in
Nigeria. Given the apparent failure of the previous anti-corruption attempts pursued by policy makers in
Nigeria, a re-conceptualisation of the nature of corruption and consequent re-design of the anti-corruption
initiatives in line with the work of Persson, Rothstein and Teorell (2013) is recommended.
5.1 Practical Implications
The practical implications of the presented research study can be found in the policy recommendations
stemming from the outcomes of the conducted analysis. As the level of FDI inflow is predicted by the
perceived level of corruption and FDI inflow translates into economic growth, addressing corruption should
be the principal focus of the policy makers in Nigeria. Given the apparent failure of the previous anti-
corruption attempts pursued by policy makers in Nigeria, a re-conceptualisation of the nature of corruption
and consequent re-design of the anti-corruption initiatives in line with the work of Persson, Rothstein and
Teorell (2013) is recommended. Moreover, in line with the uncovered relationship between oil production
levels and the extent of perceived corruption, imposing limits on annual oil production can be successful in
addressing the level of systemic corruption in the country.
5.2 Limitations
The main limitations of the presented research study relate primarily to the methodological approach
adopted. The reliance on secondary data represents a limitation on the reliability of the data and conclusions
consequently drawn. Furthermore, given the sensitive and complex nature of measuring corruption levels,
additional limitations can be found in the reliability of the Transparency International corruption index itself.
5.3 Further Research
The analysis encompassed in this research study has uncovered a number of areas in need of further
attention from the academic community. Three particular areas include the development of practical anti-
corruption measures based on the systemic conceptualisation of corruption, investigating effects of
corruption on particular sectors of the Nigerian economy and extending the scope of this research to include
other oil producing countries.
30
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