DETERMINANTS OF CAPITAL FLIGHT IN NIGERIA

DETERMINANTS OF CAPITAL FLIGHT IN NIGERIA

ABSTRACT

The verity that capital formation is a key to economic development is incontrovertible. Yet capital scarcity is norm in most developing nations like Nigeria. With this in view, this study examines the determinants of capital flight in Nigeria. In executing this crucial study, annual time series data, between 1980 and 2014 is used and error correction model (ECM) is employed after Augmented Dickey Fuller (ADF) unit root tests as well Johansen cointegration analysis has been applied to the variables. In identifying the determinants of capital flight in Nigeria, the study employs the Residual method of measuring capital flight. Of the six variables modeled as the determinants of capital flight in Nigeria; exchange rate, real interest rate, external debt stock, economic openness and political instability are found to account for capital flight. Real gross domestic product is found not to be a significant determinant of capital flight in the country. The study recommends policy options aimed at abating capital flight as well as raising investment levels in the country.