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Domestic Investment and Capital Flight Nexus in Nigeria: Empirical Evidence from New Data Set

Author

Listed:
  • Anthony Orji
  • Kenneth Kama
  • Jonathan E. Ogbuabor
  • Onyinye I. Anthony-Orji
  • Ozoemena Stanley Nwodo

Abstract

This study investigated the impact of capital flight on domestic investment in Nigeria. The data for the study were mainly sourced from CBN statistical bulletins for the period 1981 to 2017. However, the capital flight data series used in this analysis were obtained from new estimates of capital flight from the Political Economy Research Institute (PERI) at the University of Massachusetts as constructed by Ndikumana and Boyce. The Auto-Regressive Distributed Lag (ARDL) bounds test approach was adopted for the study. The result showed that capital flight significantly decreases domestic investment in both the short run and long run. Other variables found to have a significant effect on domestic investment include credit to the private sector and inflation rate. With these findings, the study, therefore, recommended that policymakers in Nigeria should consistently evolve policy measures that will curtail capital flight and make the economy competitive and more attractive for domestic investment. Others include anti-inflationary policies, strengthening anti-graft agencies to improve their effort in tackling laundering of public funds and the maintenance of more stable macroeconomic indicators which allow foreign capital inflow so as to boost private domestic investment.

Suggested Citation

  • Anthony Orji & Kenneth Kama & Jonathan E. Ogbuabor & Onyinye I. Anthony-Orji & Ozoemena Stanley Nwodo, 2022. "Domestic Investment and Capital Flight Nexus in Nigeria: Empirical Evidence from New Data Set," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 176-192.
    • Handle: RePEc:bas:econst:y:2022:i:3:p:176-192
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    References listed on IDEAS

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    1. Ndikumana, Leonce & Boyce, James K., 2003. "Public Debts and Private Assets: Explaining Capital Flight from Sub-Saharan African Countries," World Development, Elsevier, vol. 31(1), pages 107-130, January.
    2. Anthony Orji & Jonathan E. Ogbuabor & Gabriel Chiangi Aza & Onyinye I. Anthony-Orji, 2021. "Does Foreign Presence Influence the Level of Firm Technical Efficiency? Evidence from Africa," Econometric Research in Finance, SGH Warsaw School of Economics, Collegium of Economic Analysis, vol. 6(1), pages 1-20.
    3. Niels Hermes & Robert Lensink & Victor Murinde, 2002. "Flight Capital and its Reversal for Development Financing," WIDER Working Paper Series DP2002-99, World Institute for Development Economic Research (UNU-WIDER).
    4. Nirmol Chandra Das & Mohammad Ashraful Ferdous Chowdhury & Md. Nazrul Islam, 2021. "Nonlinear Threshold Effects of Institutional Quality on Capital Flight: Insights From Bangladesh," International Journal of Asian Business and Information Management (IJABIM), IGI Global, vol. 12(1), pages 43-59, January.
    5. J. K. Boyce & L. Ndikumana, 2001. "Is Africa a Net Creditor? New Estimates of Capital Flight from Severely Indebted Sub-Saharan African Countries, 1970-96," Journal of Development Studies, Taylor & Francis Journals, vol. 38(2), pages 27-56.
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    More about this item

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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