The study examines the relative contributions of external shocks and institutional quality to macroeconomic performance in Nigeria, using Structural Vector Autoregressive (SVAR) approach. The study establishes the dominance of the relative contributions of external shocks measures over institutional quality to macroeconomic performance in the country. Even though the dominance of terms of trade and foreign aid is highlighted, the role of institutional quality is equally important as it also has significant positive effect on performance. The study concludes that both external shocks and institutional quality play significant roles, and hence, posits the existence of favorable institutional environments as a panacea to successfully absorbing the influence of external shocks which are exogenous to the economy.

The study investigates the institutions" hypotheses (grease the wheels versus sand the wheels) in Nigeria by using the Autoregressive Distributed Lag (ARDL) technique. The result indicates that corruption has significant negative effect on GDP as a proxy for economic performance. The result, thus, upholds the existence of "sand the wheels" hypothesis in Nigeria. The various cases of embezzlements of public funds in the country, coupled with the high rate of money laundering outside the country, may not have given room for the existence of "grease the wheels" hypothesis. The study concludes that Nigeria has to develop its institutions for it to tap from the global progression.