Impact of Corruption on Public Investment Outcomes in Nigeria

Abstract

Corruption remains a significant barrier to public investment in Nigeria, particularly for large-scale projects. This study aims to examine the impact of corruption on public investment outcomes across varying levels of investment with time series data covering 1986 to 2023. Using simultaneous quantile regression, the analysis captures both the direct effect of corruption and its interactions with macroeconomic variables, including GDP per capita, inflation, government effectiveness, political instability, and foreign direct investment (FDI). The results demonstrate that corruption consistently reduces public investment, with the negative impact intensifying at higher quantiles. Interaction terms reveal that government effectiveness mitigates the harmful effects of corruption, while political instability exacerbates them for smaller projects but plays a more complex role in larger ones. Inflation and FDI further amplify corruption's negative effects, particularly in medium and large-scale projects. The study concludes that larger public investments are especially vulnerable to corruption, which emphasises the need for stronger institutional frameworks and governance reforms to enhance transparency and accountability in public sector investment. Lastly, macroeconomic stability and improved political conditions are crucial to enhancing public investment outcomes, particularly in large-scale projects.