Foreign aid, corruption, economic growth rate and development index in Nigeria: The ARDL approach

Abstract

Foreign aid when properly utilized is expected to grow the economy of the receiving nation. Over the years Nigeria has benefitted from foreign aid inflows in a bid to stabilize its economy and build its infrastructure. This study desires to look into how the various foreign aid components (humanitarian aids, project aids, and programme aids) have impacted the Nigerian economic growth rate and human development index using the corruption index in the country as a moderating variable. The ex-post facto research design was adopted and data obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin from 1990 to 2019. The study adopted the autoregressive distributive lag (ARDL) techniques. It was revealed that as a result of the corruption index, there was a significant negative effect of foreign aid on the growth rate of Nigeria economy in the long-run, while having a significant positive impact on the human development index as well. In the short-run, foreign aids had a significant positive effect on the growth rate of the Nigerian economy, but an insignificant negative effect on the human development index. However, the government is encouraged to ensure that foreign aid is effectively channeled into agriculture, health, education, and other productive areas.