Abstract
This study examined the nexus between capital flight and economic development in Nigeria. The null hypothesis was that capital flight has no significant relationship with economic development in Nigeria. The study used the auto regressive distributed lag (ARDL) method on data obtained from the Central Bank of Nigeria and the World Bank, for the period 1986–2018, to examine the relationship between capital flight and economic development in Nigeria. The study examined the unit root problem and cointegrating properties of the data. The unit root problem was tested for by using the augmented Dickey–Fuller (ADF) and Phillips–Perron (PP) tests. Findings from ARDL showed an inverse relationship exists between capital flight, real exchange rate, and economic development. This implies that the variables contributed significantly to reduce economic development within the study period. However, a positive relationship existed between economic development and adult literacy rate in Nigeria. By implication, improvements made in providing quality and affordable education tend to have a positive impact on economic development in Nigeria. The study concluded that economic development is strongly influenced by capital flight, real exchange, and adult literacy rates in Nigeria. The study, therefore, recommends that government policies to curb capital flight should be introduced and monitored so as to lead to economic development in Nigeria.
Highlights
It is worrisome in Africa that a major portion of the available capital is clandestinely transferred to developed economies, and this has generated interest among many researchers and academics across countries
This study examined the nexus between capital flight and economic development in Nigeria using auto regressive distributed lag (ARDL) in the period 1986–2018
Test of Unit Root Results An appropriate test has been developed by augmented Dickey–Fuller (ADF) and Phillips–Perron to consider whether a time series has a unit root
Summary
It is worrisome in Africa that a major portion of the available capital is clandestinely transferred to developed economies, and this has generated interest among many researchers and academics across countries. Capital transferred abroad from a host country cannot in any way contribute to domestic investment and other productive activities It is still unknown whether the significantly lower levels of investment with corresponding multiplier consequences on other aspects of the economy, including the growing rate of unemployment, social unrest, hunger and starvation, and general economic recession in the country, are mainly a result of capital flight (Nelson, et al, 2018). This study was guided by the following objective: to investigate the relationship between capital flight and economic development in Nigeria from 1980 to 2018 Following this introduction, the rest of the paper entails the following: Section two covers the literature review and theoretical underpinnings. The study reveals that capital flight increased steadily from one period to the other.This trend has seriously affected economic development negatively in Nigeria within the period of study. Between 1986 and 2018, there was an up–down slope, which implies that economic development was poor almost throughout the period under investigation in Nigeria
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