Abstract

Economic diversification is identified as a recipe for achieving inclusive growth and the role of institutions in strengthening the process of diversification cannot be ruled out. This study examined the role of institutions in helping economic diversification to achieve inclusive growth in Nigeria. Inclusive growth was measured using the growth rate of the inequality-adjusted human development index. Based on the Solow growth model and adopting the Johansen cointegration test, the results show that economic diversification in Nigeria does not significantly contribute to inclusive growth. The interaction of diversification with the institutions gave a positive significant result meaning that effective institutions will help economic diversification contribute to inclusive growth. Hence, the government using appropriate institutions can ensure an investment-friendly environment to support economic diversification and encourage inclusive growth in Nigeria.

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