The thesis aims to contribute to the question of the origins of efficient institutional arrangements, which are regarded essential for economic development and long-term economic growth. In Africa most institutional frameworks were established under colonial rule and then persisted to a large extent. In this sense colonialism offers a "natural experiment" - a phase in which European institutions were transferred to African countries. The thesis investigates the influence of colonial rule on the institutional development of two countries and former British colonies: Botswana and Nigeria. It applies a theoretical model of institutional legitimacy based on the theoretic work of Douglass North and Oliver Williamson. The case studies' findings highlight the persistence of pre-colonial informal institutions grounded in cultural norms and beliefs of the local populations. In addition, pre-existing levels of urbanisation, constraints on political power and integration in colonial labour markets have been factors which influenced the transfer of European institutions. (author's abstract)