CAPITAL FLIGHT AND ECONOMIC DEVELOPMENT IN SUB-SAHARA AFRICA
CAPITAL FLIGHT AND ECONOMIC DEVELOPMENT IN SUB-SAHARA AFRICA

Summary/Abstract: This study examined capital flight and economic development in Sub-Sahara Africa. Specifically, we ascertained the impact of foreign direct investments outflow, foreign portfolio investment outflow, remittances outflow and other development assistance outflow on economic development in Nigeria, Kenya and South Africa. The nature of the study necessitated the use of secondary data covering the period of 1991 through 2020. We adopted a combination of Panel Corrected Standard Error (PCSE) and the Panel Data Regression techniques in examining the impact of capital flight and economic development in Sub-Sahara Africa. The Augmented Dickey fuller (ADF) Unit root tests were used to ascertain the series properties of the variables while the Correlation analysis was conducted to ascertain the degree of relationship between the dependent and independent variables. The study revealed that Foreign Direct Investments Outflow (FDIO) exerted negative significant effect on economic development proxy (HDI) in Nigeria. This suggests that high FDIO stiffens HDI. Foreign Portfolio Investments Outflow denoted by FPIO exerted negative insignificant impact on economic development (HDI) in SSA countries throughout the study periods. Foreign Remittances Outflow denoted by REMO has a positive significant impact on economic development in SSA countries having controlled for both inflation and exchange rate. Lastly, Other Development Assistance (ODA) has a positive and insignificant impact on HDI in SSA countries in the periods under review having controlled for both inflation and exchange rate. This suggests that, a high ODA will lead to a more developed economy though weak. We therefore recommend that the government of SSA countries should ensure that all leakages attributed to foreign direct investment outflows should be closed. The Federal government in SSA countries must also shift their focus and policy directives from the oil sector to the industrial sector as this will attract the attention of foreign investors into the industrial sector.

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