Rethinking the Effect of Infrastructural Development on Industrial Development in Nigeria: Mediating Role of Institutional Quality
Saliu Adejare RAUFF (PhD) & Rasak Adetunji ADEFABI (PhD)
Extant studies indicate that effective policies to promote industrial growth in Nigeria are contingent upon addressing infrastructure issues. This study examines the interplay between infrastructural development, institutional quality, and industrial development, focusing on three objectives: the impact of overall infrastructure on industrial growth; the effects of individual infrastructure variables on industrial development; and the interactive relationship between institutional quality and infrastructure development on industrial development. Analysing annual data from 1981 to 2023 by employing the Autoregressive Distributed Lag (ARDL) regression technique. The results indicate that both short-run and long-run aggregate infrastructural development have a significant negative impact on industrial development in Nigeria. Similarly, air transport and telephone density also show significant negative relationships with industrial growth in both time frames. The only factors significantly influencing Nigeria’s industrial growth during the studied period were air travel and telephone density, while other infrastructure aspects presented weak but positive impacts. Furthermore, the interactive effects of infrastructure development and institutional quality revealed negative relationships at lags one and two, though a positive relationship was noted in the short run when only institutional quality was considered. This study therefore concludes that the level of industrial development can only improve significantly if appropriate and efficient institutional quality complements infrastructure development in Nigeria.
Keywords: Infrastructure development, institutional quality, industrial development, autoregressive distributed lag model, Nigeria.