An Empirical Analysis of the Impact of Capital Flight on Nigeria Economy

Abstract

This research work presents an empirical analysis of the impact of capital flight on Nigeria economy. The research work made use of secondary data collected from Central Bank of Nigeria’s Statistical Bulletin of various issues and National Bureau of Statistics. The empirical measurement covers the sample period between 1980 and 2014.  An Ordinary Least Square (OLS), Augmented Dickey-Fuller unit root test and Co-integration test were adopted to carry out an extensive analysis of the adopted variables which include Gross Domestic Product, Capital Flight and Exchange Rate. The results revealed that the variables have a significant effect in the positive direction. This implies that as capital flight inflow increases into the economy, it in turn increases the exchange rate causing a positive influence on the Nigeria economy within the period considered. 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. The monetary authority should ensure capacity building for local investments. Also, the Federal Government should intensify effort in the recovery of looted funds in foreign accounts and its anti-corruption campaign as this will improve the country’s image and attract inflow of funds from abroad for investment purposes in Nigeria.