Abstract
Religious diversity is a defining feature of Nigeria's social landscape, yet persistent sectarian tensions raise important questions about its implications for development. This study examines how inter-and intra-religious tolerance shape social stability and economic performance across Nigeria's 36 states and the Federal Capital Territory. Using Afrobarometer survey data, ACLED and UCDP conflict records, and state-level economic indicators, including GDP, poverty, and unemployment, for the period 1999–2024, the analysis employs two-way fixed effects, instrumental variables, and mediation frameworks to address potential endogeneity. The results indicate that higher inter-religious tolerance significantly reduces conflict incidence and improves economic performance, while intra-religious tolerance primarily strengthens social cohesion through conflict-mitigating institutional channels. Mediation evidence further shows that a substantial portion of tolerance's economic impact operates through reductions in violence and improved social stability, highlighting tolerance as a productivity-enhancing informal institution that lowers transaction costs and supports sustainable development in religiously plural societies.