The Impact of Capital Flight on the Economic Growth of Nigeria

Filed in Economics Project Topic by on October 18, 2020

The Impact of Capital Flight on the Economic Growth of Nigeria.

ABSTRACT

This work presents an empirical analysis of the impact of capital flight on the Nigeria economy. The research work made use of secondary data collected from the Central Bank of Nigeria’s Statistical Bulletin. The empirical measurement covers the sample period between 1981 and 2015.

An Ordinary Least Square (OLS), Augmented Dickey-Fuller unit root test and Co-integration test was adopted to carry out an extensive analysis of the adopted variables which include Gross Domestic Product, Capital Flight and Exchange rate, foreign reserve and foreign direct investment.

The results revealed that capital flight have a negative impact on the economy. However, recommendations were made that the government should create an enabling environment for investments in Nigeria so as to encourage more inflow of funds from abroad and dissuade outflow of funds by providing investment outlets.

Consequently, it is recommended that funds from foreign sources in form of loans, gifts, grants and aids should be judiciously used for economic growth of Nigeria. It also recommended fiscal discipline, serious and commitment on the part of government and its functionaries.

INTRODUCTION

Capital flight is the outflow of capital in the form of massive transfer of currency from one country to another. It has often been regarded as the economic responses to the portfolio choices of wealth residents of some debtor countries in recent years.

Hence, capital flight is the transfer of funds from one economy to another due to economic or political reasons. In the words of Kindle Berger, Capital flight is an illegal movement of capital from one country to another.

Indeed it is an abnormal flow of capital as it is not sanctioned by the government, this is because exchange of capital controls imposed by the particular country is not adhered to.

REFERENCES

Adaramola A. O., and Obalade A. A., (2013): Does Capital Flight Have a Force to Bear on Nigeria Economic Growth? International Journal of Developing Societies, Vol. 2, No. 2 80-86 .

Agu, C. (2006), Capital Flight and Domestic Macroeconomic Policies: Evidence from Nigeria. Department of Economics, Nsukka. Unpublished Ph.D Thesis

Ajayi S.I. (1995): Capital Flight and External Debt in Nigeria. Research Paper 35, African Economic Research Consortium (AERC), Nairobi, Kenya.

Ajayi, S. Ibi. (1997). “An Analysis of External Debt and Capital Flight in the Severely indebted Low Income Countries in Sub-Saharan Africa”, Research Department, International Monetary Fund Working Paper 68 (Washington DC).

Ajayi L.B. (2012), Capital flight and Nigeria Economic Growth, Asian Journal of Finance and Accounting, 4(2), 277-289.

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