DOES CORRUPTION AFFECT THE EFFECT OF FOREIGN AID ON ECONOMIC GROWTH IN NIGERIA? AN EMPIRICAL INVESTIGATION

Abstract

The influence of corruption on the effect of foreign aid on economic growth is investigated using Nigeria’s data spanning the period from 1994 to 2014. The ordinary least squares (OLS) estimation technique is used to estimate a multiple linear regression model for the investigation. The analysis shows that the effects of official development assistance and aid on real GDP is positive and statistically significant, and that corruption does not affect the effect of aid on growth. The study however finds that government final consumption expenditure and exchange rate are positively related to real GDP, while trade openness is observed to be negatively related to it. In light of the empirical evidence, the paper recommends for policy consideration, effort by the government to enhance the attractiveness of the country to foreign aid especially by intensifying the fight against corruption; increase in government final consumption expenditure; imposition of restriction on importation, especially on those that commodities that can be produced locally; government intervention in the foreign exchange market to avoid harmful appreciation of the currency, etc, to enhance the growth of the nation’s economy.