INTERNATIONAL JOURNAL OF HUMANITIES AND SOCIAL SCIENCES (IJHSS)
Capital Flight, Remittance Flows, and the Financing of Development in Nigeria: An Empirical Analysis
E-ISSN: 3435-6457
P-ISSN: 8654-3552
DOI: https://iigdpublishers.com/article/1669
This study examined the effect of capital flight and remittance inflows on development financing in Nigeria, with particular emphasis on the moderating role of remittances in the relationship between capital flight and development financing. Development financing was proxied by Gross Fixed Capital Formation, while capital flight, remittances, institutional quality, exchange rate, inflation, real interest rate, and economic growth served as the explanatory variables. Annual time-series data covering the study period were obtained from relevant national and international databases. The study adopted the Autoregressive Distributed Lag (ARDL) modelling approach to estimate both the short-run and long-run dynamics among the variables. The ARDL Bounds Test for cointegration revealed the absence of a long-run equilibrium relationship among the variables. The estimated results further showed that capital flight exerted a negative but statistically insignificant effect on development financing, while remittance inflows also had a negative and insignificant effect. However, the interaction term between capital flight and remittances was positive and statistically significant in the short run, indicating that remittances help mitigate the adverse effects of capital flight on development financing. The findings suggest that although remittances do not independently promote development financing, they serve as an important compensatory source of finance capable of offsetting resource losses associated with capital flight. The study concludes that reducing capital flight and enhancing the productive utilization of remittance inflows are critical for improving development financing in Nigeria. Consequently, the study recommends stronger measures to curb capital flight, improve institutional quality, and create policies that encourage the channeling of remittances into productive investments and development-oriented projects.
Olurin Enitan Olurotimi PhD & Ogein Abayomi
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