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THE EFFECT OF BAD GOVERNANCE ON THE ECONOMIC GROWTH OF STATES IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1    Background to the Study

Corruption is a complex and multifaceted phenomenon with multiple causes and effects, as it takes on various forms and functions in different contexts. It ranges from the broad terms of "misuse of public power" and "moral decay" to strict legal definitions of corruption as an act of bribery involving a public servant and a transfer of tangible resources Andvig (2018). For simplification, it can be seen as the abuse of public office for private gain or the abuse of entrusted power (World Bank, 2012; Transparency International, 2017).

Corruption is a global problem, and no country of the world is totally free of its menacing grip Chimakonam, (2019). It has been seen as a structural problem of political, economic, cultural and an individual’s malaise Akor, (2018). It has affected many countries all over the world, especially developing countries Nageri (2016). It is found not only in democratic and dictatorial societies but also in feudal, capitalist and socialist economies. Christian, Muslim, Hindu and Bhuddist cultures are equally bedeviled by corruption (Dike, 2017).

Corruption exists in the public and private sectors, profit and nonprofit as well as charitable organizations. It subsists both in developing and developed nations but is predominant in developing countries; hence, it remains a symptom of a poorly functioning nation. Although corruption is a global issue, it is a recurring issue in the Nigerian discourse. It is a significant obstacle to businesses in Nigeria, as companies are very likely to encounter bribery and other corrupt practices. Thus, corruption inhibits economic growth and affects business operations, employment and investments Sumah, (2018). Not only does corruption affect economic development in terms of economic efficiency and growth, it also affects equitable distribution of resources across the population, increasing income inequalities with a much skewed income distribution, undermining the effectiveness of social welfare programmes, and weakening effective demand in an economy and ultimately resulting in lower levels of investment, trade flows, government effectiveness, and generally human development. This, in turn, may undermine long-term sustainable development, economic growth and equality (Transparency International, 2014).

According to Transparency International (2018), corruption has a direct impact on economic growth and development and indirect effects on a country’s economic performance by affecting many factors fueling economic growth, such as investment, taxation, composition and effectiveness of public expenditure. Also, Ugur &Dasgupta, (2018) posit that corruption has indirect effects through transmission channels such as investment, human capital and public finance/expenditure. Scholars have long identified a number of channels through which corruption may affect economic growth (Mauro, 2019; Tanzi, 2017; Gupta, Davoodi& Alonso-Terme, 2018; Gyimah-Brempong, (2017). They have argued that corruption distorts incentives and market forces, leading to misallocation of resources; diverts talent and resources, including human resources, toward “lucrative” rent-seeking activities; acts as an inefficient tax on business, ultimately raising production costs and reducing the profitability of investments; decreases the productivity of investments by 

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