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

Summary/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.

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