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Abstract

It has been established that terrorism has a catastrophic effect on tourism. How does the quality of institutions in a terrorist-infected country like Nigeria moderate the catastrophic impact of terrorism on tourism? The purpose of this study, therefore, is to investigate the moderating role of institutional quality in the relationship between terrorism and tourism in Nigeria. The study used Dynamic Ordinary Least Squares (DOLS) and Canonical Cointegration Regression for main estimation and robustness, respectively. Quarterly data from 1995 to 2019 was used for the analysis. The results showed that tourist arrivals and tourism receipts declined as the terrorism fatality increased. Precisely, an increase in terrorism fatality by 1% leads to a reduction in tourist arrivals and tourism receipts by 0.09% and 0.52%, respectively. The findings remain consistent or robust to the alternative estimation method – Canonical Cointegration Regression (CCR). Our results further show that institutional quality increases both tourist arrivals and tourism receipts by 0.67% and 0.16%, respectively. On the net effect of institutional quality on tourism, we discover that institutional quality attenuates or mitigates the detrimental impact of terrorism on tourist arrivals and tourism receipts. As a policy recommendation, the study suggests the government should strengthen domestic institutions to prevent terrorist attacks and attract more tourists to boost tourist revenues.