Capital Flight and Nigerian Economic Growth: Causes and Consequences

Abstract

The problem of Capital Flight from developing countries has attracted the attention of many researchers. The focus of such studies has encompassed the magnitude, causes and consequences of capital flight and its implications for external borrowing. This study evaluated the impact of capital flight on Gross Domestic Product (GDP) and Gross Capital Formation (GCF) as major indices of growth in the Nigerian economy for the period 1974-2007. The study used co-integration and Error Correction Mechanism as its estimation techniques. The results obtained showed that Capital Flight has negative impact on economic growth in Nigeria. Consequently some policy prescriptions were recommended, including the need for appropriate macroeconomic policies to encourage domestic investments as well as transparency in governance.