Despite Nigeria’s vast economic potential and status as Africa’s largest oil producer, the country continues to grapple with abysmally low levels of private sector investment relative to its gross domestic product. While extensive literature has explored macroeconomic impediments to capital formation, the psychological and institutional cost of corruption perception remains a contentious, under-explored frontier. This study investigates the impact of Corruption Perception, measured via Transparency International’s Corruption Perceptions Index (CPI), on Private Sector Investment Decisions (capital formation) in Nigeria from 2000 to 2023. Unlike traditional analyses that treat corruption as a monolithic variable, this study integrates a multidimensional control framework, incorporating Demographic Factors (DF), Macroeconomic Factors (MF), Institutional Factors (INSF), Global Factors (GF), and Infrastructural Factors (INFF). Employing a cross-sectional time-series regression model with robust post-estimation diagnostics, the analysis reveals a statistically significant inverse relationship between perceived corruption and capital formation. The findings suggest that while macroeconomic stability is a prerequisite, it is the "trust deficit"—captured by low CPI scores—that acts as a silent tax, dissuading long-term capital commitment. This paper contributes to the discourse by disentangling the "sand the wheels" hypothesis from the "grease the wheels" argument in the Nigerian context, offering empirical evidence that perception, rather than just actual prosecution, drives investment inertia. The study recommends a paradigm shift from performative anti-graft rhetoric to structural institutional reforms that enhance transparency and judicial independence.
Onipe Adabenege Yahaya (Fri,) studied this question.
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