Dynamic Empirical Analysis of the Determinants of Capital Flight in Nigeria

Evelyn Nwamaka Ogbeide-Osaretin () and Olotu M. Efe ()
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Evelyn Nwamaka Ogbeide-Osaretin: Edo University Iyamho
Olotu M. Efe: Novena University

Acta Universitatis Danubius. OEconomica, 2020, issue 16(1), 216-227

Abstract: The importance of capital flight and it’s determinants in Nigeria cannot be over emphasized giving the need for capital towards the country’s development. However, it is worrisome of the rate evasion of these capital which is contrary to economic theory. Questions are being raised on how Nigeria can achieve the quest of development in the face of this rapid capital evasion. This study therefore investigated on the determinant of capital flight in Nigeria. Recent data from World Bank Development Indicators (WDI) were used employing the residual approach to measure of capital flight in an autoregressive distributed lag (ARDL) model technique. Outcome from the research revealed there is no short-run dynamics among the variables and previous levels of capital flight substantially fueled more capital flight. Trade openness and exchange rate appreciation were found to be a substantial means to reduce capital flight. Overall, the study revealed that external debt, inflation, foreign exchange reserve, interest rate spread and political stability constituted the determinants of Nigeria’s capital flight. The political regime was found not to have a substantial impact on the flight of capital. The study therefor recommend among others, the avoidance of non-productive loans to reduce external debt, appreciation of exchange rate and the increase in trade openness.

Keywords: ARDL; capital flight; determinants; trade openness (search for similar items in EconPapers)
Date: 2020
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