Impact of Capital Flight on Gross Fixed Capital Formation in Nigeria

Abstract

Capital flight remains a controversial issue which its impact yields no good to any economy in which it is taking place. The main aim of the study was to investigate the nature of the relationship existing between capital flight and gross fixed capital formation in Nigeria. We used the World Bank residual approach to measure capital flight. Data from 1981 to 2020 was sourced from Central Bank of Nigeria Statistical Bulletin. The study relied on an autoregressive distributed lag model for analysis. Our empirical analysis revealed that a negative relationship exists between gross fixed capital formation and capital flight in Nigeria. We therefore suggest reducing interest rate as this will encourage investors to access more credit facilities and increase domestic investment which will help to reduce the menace of capital flight in the country.