Capital Flight and the Nigerian Economy: An Empirical Reassessment

Abstract

The study empirically reassessed the impact of capital flight on the economic growth of Nigeria. The capital escaping from an economy is termed capital flight. This happens when capital escapes into safety or secrecy thereby depriving the source economy from its use. Reasons for this are poor economic situation, political crises, corruption, etc. Secondary data were collated from the publications of the Central Bank of Nigeria, Bureau- De- Change, and Global Finance Integrity to examine the relationship that exists between the Gross Domestic Product (GDP) of Nigeria and the Capital Flight from the country. The data covered a period of 20 years (i.e.1991-2010). The simple linear regression model was used to analyze the data. This was coupled with the F-ratio used to test the formulated hypothesis. It was discovered from the analysis that there exists a very high positive correlation between GDP in Nigeria and capital flight from the country. It was also found out that capital flight has a significant impact on the GDP of Nigeria. It was therefore recommended among others that the Nigerian economic and political environment should be made investment friendly by securing lives and property of present investors and would be investors. Government should also curtail the wind of corruption blowing across all the levels of government which has been aiding illegal transfer of capital from the economy. The economy would surely conquer the war against capital flight if the suggestions are implemented.

Keywords: Capital flow, Globalization, Gross Domestic Product