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Abstract

Over the years, there has been an increasing concern for capital flight in Nigeria in relation to economic growth. At the same time, the prospect for solving this problem remains grim. In a country like Nigeria with low income, capital flight weakens growth potential. This study examined the factors that contribute to capital flight and determined the impact of capital flight on economic growth in Nigeria. Secondary data were sourced from Central Bank of Nigeria covering 1981-2020. The study employed the Auto-Regressive Distributed Lag (ARDL) Model. The findings revealed that external debt and current account balance contributes to capital flight in Nigeria. On the other hand, capital flight has adverse effect on the economic growth of Nigeria. Depreciation of exchange rate and high inflation rate discourages economic growth in an economy which in turn encourages more capital flight in an economy. We therefore recommend, among others, that there is need to reform and enforce laws and policies that will discourage capital flight.
Keywords: Capital Flight, Illicit Financial Flow, ARDL