Abstract
This study employs four-dimensional and one composite indices of democratization constructed to capture the democratization processes in Nigeria’s transition polity, to investigate the empirical relationships between the levels of democratization in Nigeria and two economic growth variables – domestic savings and domestic investment. As would be expected, the findings do not settle the debate in any direction. However, they could shed some light on the differences between the dimensional and the overall effects of democratization on economic variables. The results of the analyses show that the short-run responses of growth variables to changes in democratization may differ from their long-run responses.
Highlights
Low growth rates in third-world economies are widely attributed to low and declining rates of domestic savings and investment
The presence of an inherent negative relationship between external resources and a country’s domestic capacity for growth and development may depend largely on the democratic nature of the economy in question. This concern highlights some key questions in the study of capitalist economic growth, namely which political institutions are most friendly to economic freedoms and under what type of political regime are savers, investors, consumers and producers likely to feel most safe? There appear to be no conclusive answers to these important questions
All the data are drawn from publications of the Central Bank of Nigeria (CBN), the Federal Ministry of Finance (FMF) and the Federal Office of Statistics (FOS)
Summary
Low growth rates in third-world economies are widely attributed to low and declining rates of domestic savings and investment. The presence of an inherent negative relationship between external resources and a country’s domestic capacity for growth and development may depend largely on the democratic nature of the economy in question. This concern highlights some key questions in the study of capitalist economic growth, namely which political institutions are most friendly to economic freedoms and under what type of political regime are savers, investors, consumers and producers likely to feel most safe?
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