Governance quality and public sector procurement of infrastructure projects in developing countries: evidence from Nigeria

Abstract

Purpose In developing countries, governance structures are reputed to be weak, and infrastructure procurement is largely achieved through public sector financing. This study aims to examine the impact of governance quality on public sector infrastructure procurement in Nigeria. Design/methodology/approach Data on public infrastructure expenditure (CAPEX), revenue (REV) and debt burden (DEBT) were sourced from the Central Bank of Nigeria (CBN) and National Bureau of Statistics (NBS) for the period 2000–2017. In addition, the Corruption Perception Index (CPI) of Nigeria for the period was obtained from Transparency International. Data were analysed using Ordinary Least Square regression and Granger Causality Test. Findings Results indicate that CPI and DEBT have negative effects on public infrastructure procurement, whereas REV has a significant positive impact. The findings suggest that an increase in public sector corruption leads to increase in the share of public budget allocated to infrastructure procurement. Moreover, an increase in the amount allocated to debt burden lowers the share of public resources available for infrastructure procurement. Findings also show that revenue is a leading indicator of infrastructure procurement, and public expenditure for infrastructure procurement is leading cause of public sector corruption. Social implications In Nigeria, resources for financing infrastructure are scarce, and there have been reports of poor governance in infrastructure procurement. The establishment of a relationship between governance quality and infrastructure procurement will help in more efficient allocation of scarce public resources. Originality/value To resolve the governance-infrastructure question, the study established causal relationships between governance quality variables and public expenditure on infrastructure.