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Impact of Capital Flight on Economic Growth in Nigeria: An Econometric Approach

Received: 22 December 2017     Accepted: 15 January 2018     Published: 21 March 2018
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Abstract

This article examined the impact of capital flight on economic growth in Nigeria. Classical methods of predicting impact of capital flight on economic growth have not yielded much result. This research examines time series data which includes gross domestic product (GDP), capital flight, exchange rate and external debt which was computed from the national Bureau of Statistics and central Bank of Nigeria Statistical Bulletin. The model estimated to cover the period 1980 – 2012 was analyzed using combined global technique, Artificial Neural Network (ANN) as a predictive technique and classical techniques like Ordinary Least Square (OLS) and co-integration/error correction methods. The variable in the model was estimated for possible co-integration. Research finding showed that capital flight have adverse impact on the GDP, while exchange rate impacts positively on the GDP which is in consonance with apriori expectation. Based on the findings, recommendations were made on how to check the menace of capital flight in Nigeria. Among such recommendation is the need for the government to setup appropriate institutions to check the volume of capital that is been flown out of the country, there should be restrictions on external borrowing tendencies on all levels of governments and agencies as well as private sector organizations; government should maintain a competitive and stable exchange rate policy.

Published in Journal of Business and Economic Development (Volume 3, Issue 1)
DOI 10.11648/j.jbed.20180301.14
Page(s) 22-29
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2018. Published by Science Publishing Group

Keywords

Gross Domestic Product, Capital Flight, External Debt, Exchange Rate

References
[1] Onwioduokit E. A. (2007), “Capital Flight from Nigeria: An Empirical Re-Examination Accra, Ghana: West African Monetary Institute.
[2] World Bank. (1985) Case study: Mexico. In D. R. Lessard & J. Williamson, (Ed.), Capital flight and third World debt. Washington, D. C.: Institute for International Economics.
[3] Cooper, H. W., & Hardt, J. P. (2000). Russian Capital Flight, Economic Reforms, and U.S Interests. Congressional Research Service (CRS), Report for congress.
[4] Boyce, J. K., & Ndukumana, L. (2001). Is Africa a Net Creditor? New Estimates of Capital Flight from Severely Indebted Sub-Saharan African Countries. Journal of Development Studies, 38 (2) 27-56.
[5] World Bank (1995).
[6] Erbe, S. (1985) “The Flight of Capital from Developing Countries”, Intereconomics (November/December).
[7] Morgan G. T. C (1986): ‘LDCs Capital Flight, World Financial Market”, (March).
[8] Cline, William R., “Discussion” (of Chapter 3), in Donald R. Lessard and John Williamson, eds., Capital Flight and Third World Debt, Washington, D. C., Institute for International Economics, 1987.
[9] Boyce, J. K., & Ndukumana, L. (2001). Is Africa a Net Creditor? New Estimates of Capital Flight from Severely Indebted Sub-Saharan African Countries. Journal of Development Studies, 38 (2) 27-56.
[10] Collier, P., Hoefler. A & Patillo C. (2001). Flight Capital as a Portfolio Choice, World Bank Economic Review. Vol 15/1.
[11] Mohammed S. and Finoff K. (2004). ‘Capital flight from South Africa, 1980-2000. African.
[12] Development and Poverty Reduction, Forum Paper.
[13] Salisu, M. (2005). The Role of Capital Flight and remittances in Current Account Sustainability in Sub-Saharan Africa. Development Research Department, African Development Bank.
[14] Ayadi. (2008). Econometric Analysis of Capital Flight in Developing Countries. 8th Global Conference of Economics, (p. 32 (8)). Abuja.
[15] L. Glynn, P. Koenig: The Capital Flight Crisis, in: Institutional Investor, November 1984.
[16] Salisu, M. (2005). The Role of Capital Flight and remittances in Current Account Sustainability in Sub-Saharan Africa. Development Research Department, African Development Bank.
[17] Deppler, M., & Williamson, M. (1987). Capital Flight: Concept, Measurement and Issues. Washington: International Monetary Fund.
[18] Chukwuma, A. (2010). Domestic Macroeconomic Policies and Capital Flight from Nigeria: Evidence from A Macro-econometrics Model. Economic and Financial Review, p. volume 48/3.
[19] Obadan, M. I. (2004). The Economics of Development And Planning. India. Vrinda Publication Ltd.
[20] Boyce, J. K., & Ndukumana, L. (2001). Is Africa a Net Creditor? New Estimates of Capital Flight from Severely Indebted Sub-Saharan African Countries. Journal of Development Studies, 38 (2) 27-56.
[21] Jingan, M. L (1997). Applied Econometrics. Benin City. Mindex Publishing.
[22] [24). Valeriia, G. (2009). The Impact of Capital Flight on Economic Growth. Russia; Kyive School of Economics.
[23] Bakare, A. S. (2011). The Determinants and Roles of Capital Flight in the Growth of Process of Nigerian Economy: Vector Autoregressive Model Approach. British Journal of Management and Economics, 1 (2), 100-133.
[24] Otene, S. and Richard, E. (2012. Capital Flight and Nigeria, s Economy. Journal of Research In National Development. 10 (2).
[25] Adaramola, A. & Obalade, A. A. (2013). Does Capital Flight Have a Force to Bear on Nigeria Economic Growth. International Journal of Developing Societies, vol 2 (2).
[26] Central Bank of Nigeria (CBN) Statistical Bulletin (2012).
[27] Iyoha, M. A (2004). Applied Econometrics. Benin City. Mindex Publishing.
[28] Gujarat & Sageetha (2007), Basic Econometrics. India. Tata Mcgraw Hill Publishing Company.
[29] Akani, W. H. (2013). Analysis of the Effects of Capital Flight on Economic Growth: Evidence from Nigerian Economy. European Journal on Business and Management, vol 5, No. 17.
[30] Boyce, J. K., & Ndukumana, L. (2001). Is Africa a Net Creditor? New Estimates of Capital Flight from Severely Indebted Sub-Saharan African Countries. Journal of Development Studies, 38 (2) 27-56.
Cite This Article
  • APA Style

    Samson Bredino, Peter Fiderikumo, Adedoyin Adesuji. (2018). Impact of Capital Flight on Economic Growth in Nigeria: An Econometric Approach. Journal of Business and Economic Development, 3(1), 22-29. https://doi.org/10.11648/j.jbed.20180301.14

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    ACS Style

    Samson Bredino; Peter Fiderikumo; Adedoyin Adesuji. Impact of Capital Flight on Economic Growth in Nigeria: An Econometric Approach. J. Bus. Econ. Dev. 2018, 3(1), 22-29. doi: 10.11648/j.jbed.20180301.14

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    AMA Style

    Samson Bredino, Peter Fiderikumo, Adedoyin Adesuji. Impact of Capital Flight on Economic Growth in Nigeria: An Econometric Approach. J Bus Econ Dev. 2018;3(1):22-29. doi: 10.11648/j.jbed.20180301.14

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  • @article{10.11648/j.jbed.20180301.14,
      author = {Samson Bredino and Peter Fiderikumo and Adedoyin Adesuji},
      title = {Impact of Capital Flight on Economic Growth in Nigeria: An Econometric Approach},
      journal = {Journal of Business and Economic Development},
      volume = {3},
      number = {1},
      pages = {22-29},
      doi = {10.11648/j.jbed.20180301.14},
      url = {https://doi.org/10.11648/j.jbed.20180301.14},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jbed.20180301.14},
      abstract = {This article examined the impact of capital flight on economic growth in Nigeria. Classical methods of predicting impact of capital flight on economic growth have not yielded much result. This research examines time series data which includes gross domestic product (GDP), capital flight, exchange rate and external debt which was computed from the national Bureau of Statistics and central Bank of Nigeria Statistical Bulletin. The model estimated to cover the period 1980 – 2012 was analyzed using combined global technique, Artificial Neural Network (ANN) as a predictive technique and classical techniques like Ordinary Least Square (OLS) and co-integration/error correction methods. The variable in the model was estimated for possible co-integration. Research finding showed that capital flight have adverse impact on the GDP, while exchange rate impacts positively on the GDP which is in consonance with apriori expectation. Based on the findings, recommendations were made on how to check the menace of capital flight in Nigeria. Among such recommendation is the need for the government to setup appropriate institutions to check the volume of capital that is been flown out of the country, there should be restrictions on external borrowing tendencies on all levels of governments and agencies as well as private sector organizations; government should maintain a competitive and stable exchange rate policy.},
     year = {2018}
    }
    

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    T1  - Impact of Capital Flight on Economic Growth in Nigeria: An Econometric Approach
    AU  - Samson Bredino
    AU  - Peter Fiderikumo
    AU  - Adedoyin Adesuji
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    DO  - 10.11648/j.jbed.20180301.14
    T2  - Journal of Business and Economic Development
    JF  - Journal of Business and Economic Development
    JO  - Journal of Business and Economic Development
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    EP  - 29
    PB  - Science Publishing Group
    SN  - 2637-3874
    UR  - https://doi.org/10.11648/j.jbed.20180301.14
    AB  - This article examined the impact of capital flight on economic growth in Nigeria. Classical methods of predicting impact of capital flight on economic growth have not yielded much result. This research examines time series data which includes gross domestic product (GDP), capital flight, exchange rate and external debt which was computed from the national Bureau of Statistics and central Bank of Nigeria Statistical Bulletin. The model estimated to cover the period 1980 – 2012 was analyzed using combined global technique, Artificial Neural Network (ANN) as a predictive technique and classical techniques like Ordinary Least Square (OLS) and co-integration/error correction methods. The variable in the model was estimated for possible co-integration. Research finding showed that capital flight have adverse impact on the GDP, while exchange rate impacts positively on the GDP which is in consonance with apriori expectation. Based on the findings, recommendations were made on how to check the menace of capital flight in Nigeria. Among such recommendation is the need for the government to setup appropriate institutions to check the volume of capital that is been flown out of the country, there should be restrictions on external borrowing tendencies on all levels of governments and agencies as well as private sector organizations; government should maintain a competitive and stable exchange rate policy.
    VL  - 3
    IS  - 1
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Author Information
  • Economics Department, University of Port Harcourt, Rivers State, Nigeria

  • Department of Banking and Finance, Bayelsa State College of Arts and Science, Bayelsa State, Nigeria

  • Petroleum and Gas Engineering Department, University of Port-Harcourt, Rivers State, Nigeria

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