The incidence of capital flight from Nigeria

Objective: This paper reports the outcome of an investigation into the incidence of capital flight from Nigeria. Capital flight was noted to have generally been on the increase and was hardly less than 15% of the national income in each of the four decades enclosed by the period 1970 to 2010. The policy and economic environments and political developments in the country were suspected enabling factors. Expectations too appeared to have played major contributory roles. A combination of the push factors theory and the portfolio risk approach was accordingly employed in the analysis.

Data/Methods: Data from secondary sources were found most suitable for use in the study. The modeling process took cognizance of the data series’ properties. The analysis was restricted to the short run with model specification in nominal terms favored. The restriction to the short run was to avoid the pitfalls inherent in the ambiguity surrounding the long run effects of some explanatory variables while the nominal specification was to appropriately enable the investigation of the effects of price level changes and differential.

Results: Results were produced for two different specifications. The first had the dependent variable expressed in absolute terms and the second, alongside some other variables, as a ratio of the gross domestic product. The analysis produced some remarkable results, in particular, giving indication of the variables of interest in the context of policy formulation and/or adjustment. Although, some conflicting outcomes were recorded under the two specifications (nominal exchange rate changes and changes in parallel market exchange rate premium), they were not cogent enough to vitiate the conclusions.