IMPACT OF CAPITAL FLIGHT ON ECONOMIC DEVELOPMENT IN NIGERIA

Abstract

Capital flight has continued to generate debate across the world. Most developing countries Nigeria in particular are having their own share of the problem. This are burning issues regarding its actual measurement and direction of flow. This study is set to examine the effect of capital flight on economic development in Nigeria from 1980 to 2020. Due to the stochastic nature of time series data, diagnostic tests were conducted to ascertain the behavior of the series. The Augmented Dickey Fuller (ADF) and Philips Perron (PP) test results are reported. Based on these tests, the all the variables in the model became stationary after first differencing, that is, they are integrated of order one I(1). Because of this order of integration, the Johansen co-integration test was conducted to check for possible long run relationship. Due to the absence of long-run relationship, unrestricted Vector Autoregressive (VAR) model was specified and used for the estimation. Results from the VAR estimation reveal that Poverty is an increasing function of poverty. There is a negative impact of capital flight on economic development in Nigeria over the period of study. External debt is detrimental to economic development if mismanaged. Floating exchange rate where multiple rates are charged in different markets is detrimental to economic development in Nigeria over the period of study. This paper recommended that training in skill acquisition should be encouraged in Nigeria in order to alleviate poverty. Capital flight should be checked with serious penalties on the perpetrators. In addition, external debt should be channel to economic uses. And finally floating exchange rates where different rates are charged in different markets is should be abolished in Nigeria.