Institutional Quality, Petroleum Resources and Economic Growth: A Difference-In- Differences Approach Using Nigeria, Brazil and Canada
Dr. EMMANUEL, NATHAN; Dr. EBI, BASSEY OKON

Abstract
Canada and Brazil are endowed with abundant petroleum resource like Nigeria. The GDP per capita figures for Canada, Brazil and Nigeria from 2000 to 2010 show that the economic status of the two countries is significantly better than that of Nigeria. The contribution of oil rents to GDP figure for Nigeria compared to the two countries indicates that Nigeria is over dependent on oil at the expense of other sectors of the economy. Corruption assessment scores for the three countries suggest that Nigeria is more corrupt, implying weak institutions compared to Canada and Brazil. This calls for concern; is the slow Nigeria economic performance in relation to that of Canada and Brazil attributable to over dependence on oil and weak institutions in Nigerian? To examine this, we employed “Difference-in-Differences” method, and obtained difference in per capita GDP between Canada and Nigeria (PCDCN), Brazil and Nigeria (PCDBN), difference in oil rents to GDP ratio between Canada and Nigeria (OILDCN), between Brazil and Nigeria (OILDBN), difference in corruption index between Canada and Nigeria (CORDCN), between Brazil and Nigeria (CORDBN), difference in government effectiveness index between Canada and Nigeria (GOVDCN) and between Brazil and Nigeria (GOVDBN), and difference in annual inflation rate between Canada and Nigeria (INFDCN) and between Brazil and Nigeria (INFDBN). Granger Causality Test Statistics was used to test whether the difference in economic growth proxy by per capita GDP between Canada and Nigeria was caused by differences in petroleum sector proxy by oil rents to GDP ratio, differences in institutional qualities proxy by differences in corruption index (CORDCN) and government effectiveness index (GOVDCN) and differences in annual inflation (INFDCN). We adopted the same approach for the difference between Brazil and Nigeria economies. Ordinary Least Squares (OLS) econometric estimation technique was used to examine the impacts of the differences in oil sector, institutional qualities, and annual inflation on the difference in economic growth between Canada and Nigeria; and Brazil and Nigeria. The Granger causality results shows that, differences in economic growth between Canada and Nigeria (PCDCN) is caused by differences in their corruption (CORDCN) and that there is a bidirectional causation between difference in corruption (CORDCN) and difference in governance effectiveness (GOVDCN). While the OLS results reveals that difference in corruption was the most significant cause of the difference in growth performance between Canada and Nigeria; and Brazil and Nigeria. The coefficient of CORDCN was 0.452 with a probability value of 0.001, while the coefficient of CORDBN was 0.565 with a probability value of 0.001. Hence, ceteris paribus, we are over 99 percent sure that a 10-percent fall in the corruption gap will result to about 4.52 percent and 5.65 percent fall in the growth gap between Canada and Nigeria; and Brazil and Nigeria respectively. Based on the results, we recommended that quality institution (low corruption) is indispensable in bridging the gap in economic performance between Canada and Nigeria as well as Brazil and Nigeria.

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