International Journal of Humanities and Social Science

ISSN 2220-8488 (Print), 2221-0989 (Online) 10.30845/ijhss

Impact of Capital Flight on Exchage Rate and Economic Growth in Nigeria
Saheed, Zakaree S.; Ayodeji, S.

Capital flight has been a source of major concern in developing countries, especially in Africa, where there is shortage of capital essential for development. Capital flight from resource starved countries to economically advanced countries is viewed as a diversion of domestic savings away from financing domestic real investment and in favor of foreign financial investment. consequently, the pace of growth and development of the economy is retarded. More so, since it involves transferring capital to foreign countries, it encourages increasing demand for foreign currency, especially dollar, which tends to exert pressure on exchange rate.The objective of this paper is to examine the impact of capital flight on exchange rate and economic growth in Nigeria, using OLS method to analyse the secondary data obtained through the Central Bank of Nigeria, National Bureau of Statistics and other sources. The findings indicate that capital flight has a positive and statistically significant impact on the exchange rate in Nigeria, and in contrast to previous work, capital flight has a positive effect on economic growth in Nigeria. Based on the findings, recommendations were made on how to check the menace of capital flight in developing countries, especially Nigeria. Among such recommendations is the need for further training for the Nigerian customs so as to improve their effectiveness in tackling cases of misinvoices in import and exports.

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