The Effect of Capital Flight and Foreign Direct Investment on Nigerian Economy

Author(s)

Joseph, Fineboy Ikechi , Akujor, Jane Chinyere , Nwankwo, Kelechi Odii ,

Download Full PDF Pages: 18-31 | Views: 68 | Downloads: 22 | DOI: 10.5281/zenodo.12801091

Volume 13 - June 2024 (06)

Abstract

The study examines the effect of capital flight and foreign direct investment on Nigerian economy for the period of 2008-2019. The data were analysed using Multiple Regression in line with the research objectives. The findings reveal that capital flight does have significant effect on economic growth in Nigeria. It is equally revealed that foreign direct investment does have a significant effect on economic growth in Nigeria; a confirmation that foreign direct investment in Nigeria has reduced drastically as a result of political instability, lack of transparency, widespread corruption and poor quality of infrastructure. Based on the findings, it was concluded that increase in capital flight and reduction in foreign direct investment in Nigeria would continue to impact the economy negatively. The study therefore recommended that the government, politicians and the policy makers should formulate policies to attract foreign investors rather than illicitly and extravagantly sending or spending money overseas. Policies that would encourage reception of new technology and more job opportunities and increased productivity into the economy should be encouraged. It is also recommended that the domestic investors should be considered while formulating policies that could attract and motivate existing and potential domestic investors in Nigeria and also reduce illicit flow of funds abroad as this in turn will enhance the GDP of the nation.

Keywords

Foreign Direct Investment, Capital Flight, Gross Domestic Product, Multinational Corporations

References

Action Aid et al (2009). Breaking the Curse:  How Transparent Taxation and Fair Taxes Can Turn Africa’s Mineral Wealth into Development. Available-at www.actionassistance.org/main.aspx?PageID=1319 (August 2009).

 

Action Aid (2009). Accounting for poverty: How international tax rules keep people poor. Available at www.actionassistance.org.uk/doc_lib/accounting_ for_poverty.pdf (accessed October 2009).

Asagunla, T. M., (2018). Oil revenue and output growth in Nigeria. International Journal of Economics and Business Management, 4(6): 65-74.

Ayodele, T.D. (2014) “Capital Flight and the Nigerian Economy: An Empirical Reassessment’. Information and Knowledge Management, Vol. 4, No.4: pp 7-13.

 

Apata, T.G., Folayan, A., Apata, O.M. & Akintua, J. (2011). The economic role of Nigeria’s subsistence agriculture in the transition process: Implications for rural development. Paper Presented at the 85th Annual Conference of the Agricultural Economics Society, 18-20th April, Warwick University, Warwick.

 

Baunsgaard, Thomas and Michael, K (2005). Tax Revenue and Trade Liberalization. IMF Working Paper WP/05/112. Available at www.imf.org/external/pubs/ft/wp/2005/wp05112.pdf (September 2009)

 

  Baker, Raymond (2008). The Ugliest Chapter in Global Economic Affairs since Slavery. Global-Financial-Integrity.Available-at -www.gfip.org/index.php?option=com_content&task=view&id=109&Itemid=74(August 2009

 

  Baker, Raymond and Eva, J (2008). The Issue of Illicit Financial Flows. Commentaire, Hiver 2008–2009, volume 31, numéro 124. Available at www.gfip.org/storage/gfip/rwb ej winter 2008 commentaire piece.pdf (August 2009)

 

Bloomberg (2009). Coca-Cola, Oracle, Intel Use Cayman Islands to Avoid U.S. Taxes. Published 5.5.2009 at www.carmodylegal.com/Tax_Whistleblower_&_.Rewards/Overview files/Ugland%20House-Obama%20Article.pdf (October 2009).

Barnet, R. J. and John Cavanagh (1994). Global Dreams; Imperial Corporations and the New World Order. New York: Simon and Schuster.

 

Christian Aid (2008). Death and Taxes: the true toll of tax dodging. Available at www.christianassistance.org.uk/images/deathandtaxes.pdf (August, 2009).

 

Christian,A (2008). Death and taxes: the true toll of tax dodging. Available at www.christianassistance.org.uk/images/deathandtaxes.pdf (August 2009).

 

Ezirim, A.C., Okeke, C.T. & Ebiringa, O.T. (2010). “Achieving vision 2020 in Nigeria: A review of the economic and karket-oriented business reforms.” Journal of Sustainable Development in Africa, 12(4), 58-71.

 

Eurodad (2009). European Network on Debts and Development. Annual Report 2009.

 

Ezejelue, A.C and Ihendinihu, J.U (2006).Personal Income Taxation in Nigeria.LIins     Consult Nig, Okigwe.

 

Greider, William, 1997. One World, Ready or Not; The Manic Logic of Global Capitalism. New York: Simon and Schuster.

 

Global Reporting Initiative (2006). GRI Guidelines, Economic Indicator Protocol, EC1, version 3.0, sivu 5. Available at www.globalreporting.org/NR/rdonlyres/A4C5FA04-3BD3-4A02-B083-6B3B00DEAF61/0/G3_IP_Economic.pdf (August 2009).

 

Gupta, S.C., C. Pattulo and S. Wagh (2007) “Impact of Remittances on Poverty and Financial development in Sub-Saharan African countries”. IMF Working Paper 07/38.

 

Lawrence, Robert Z. (1994) "Trade, Multinationals & Labor," Cambridge: NBER, Working Paper No. 4836, August.

 

Farok J. Contractor (2016). Tax Avoidance by Multinational Companies: Methods, Policies, and Ethics. Rutgers Business Review Vol. 1, No. 1 27.

Feenstra, Robert C. and Gordon H. Hanson, 1996. "Globalization, Outsourcing and Wage Inequality", American Economics Review, May, pp. 240-245.

Global Financial Integrity (2014). Illicit Financial Flows to and from Developing Countries: 2004-2014

 

Global Reporting Initiative (2017). GRI Guidelines, Economic Indicator Protocol, EC1, version 3.0, sivu 5.

 

James, C, Gerald, E, and Patricia, K (1998).  Multinational Corporations, Capital Mobility and the Global Neo-Liberal Regime: Effects on Northern Workers and on Growth Prospects in the Developing World.   Seoul Journal of Economics

Kar, Dev and Devon Cartwright-Smith (2009). Illicit Financial Flows from Developing Countries 2002–2006. Global Financial Integrity. Available at www.gfip.org/storage/gfip/documents/executive - final version 05-14-09.pdf (August 2009).

Markle, K. (2015). A comparison of the tax‐motivated income shifting of multinationals in territorial and worldwide countries. Contemporary Accounting Research, 33(1), 7-43.

Markusen, James R., and Anthony J. Venables, 1996. "Multinational Production, skilled Labor and Real Wages", NBER Paper, No. 5483, March.

 

OECD (2007).  Revenue statistics 1965–2006. October 2007, table A, p.19

 

OECD (2009a).  Development assistance at its highest level ever in 2008. Published 30.3.2009 at

www.oecd.org/document/35/0,3343,en_2649_34487_42458595_1_1_1_1,00.html (August 2009)

 

OECD (2009b). A progress report on the jurisdictions surveyed by the OECD Global Forum in implementing the internationally agreed tax standard. Published 3.9.2009. Available at www.oecd.org/dataoecd/50/0/43606256.pdf (September 2009).

 

OECD (2009c).Tax Information Exchange Agreements. Available at www.oecd.org/document/7/0,3343,en_2649_33767_38312839_1_1_1_1,00.html (October 2009.

Krugman, Paul R. and Robert Z. Lawrence, 1994.  Trade, Jobs and Wages. Scientific American, April, 1994, Vol. 270. No. 4. pp. 44-49.

Organisation for Economic Co-operation and Development (2013). Action Plan on Base Erosion and Profit Shifting (Paris).

Princeton Studies International Finance (1996).Foreign Direct Investment and Capital Flight.

Kofi Annan African Progress Report, 2013. Equity in extractives: Stewarding Africa's natural resources for all. A Report Presented in Africa Progress Panel held in Cape Town, South Africa on May 10, 2013.

 

Krugman, Paul R. and Anthony, V (1995). Globalization and the Inequality of Nations NBER Working Paper, no. 5098.

Service Centre for Development Cooperation (2010). Illegal Capital Flight from Developing Countries, r Series: 101,ISSN: 1236-4797 ,ISBN: 978-952-200-145-0

 

Rabah, A, Gregoire, R.G, and Lemma, W; Senbet (2014), African Economic Research Consortium and University of Maryland (Senbet), CERDI-CNRS and FERDI (Rota-Graziosi).

 

Service Centre for Development Cooperation, 2010. Illegal Capital Flight from Developing Countries, Series. pp: 101.

 

U.S. Senate Permanent Subcommittee on Investigations–Committee on Homeland Security and Governmental Affairs. 2011. Repatriating offshore funds: 2004 Tax Windfall for selected Multinationals.

 

The World Bank Group’s Response to Illicit Financial Flows: A Stocktaking (2015)

 

 IMF’s  data on FDI  on Balance of Payments Manual (1993).

 

Ezirim, A.C., Okeke, C.T. & Ebiringa, O.T. (2010). “Achieving vision 2020 in Nigeria: A review of the economic and karket-oriented business reforms.” Journal of Sustainable Development in Africa, 12(4), 58-71.

 

Eurodad (2009). European Network on Debts and Development. Annual Report 2009.

 

Ezejelue, A.C and Ihendinihu, J.U (2006).Personal Income Taxation in Nigeria.LIins     Consult Nig, Okigwe.

 

Global Reporting Initiative (2006). GRI Guidelines, Economic Indicator Protocol, EC1, version 3.0, sivu 5. Available at www.globalreporting.org/NR/rdonlyres/A4C5FA04-3BD3-4A02-B083-6B3B00DEAF61/0/G3_IP_Economic.pdf (August 2009).

 

Farok J. Contractor (2016). Tax Avoidance by Multinational Companies: Methods, Policies, and Ethics. Rutgers Business Review Vol. 1, No. 1 27.

Global Financial Integrity (2014). Illicit Financial Flows to and from Developing Countries: 2004-2014

 

Global Reporting Initiative (2017). GRI Guidelines, Economic Indicator Protocol, EC1, version 3.0, sivu 5.

 

James, C, Gerald, E, and Patricia, K (1998).  Multinational Corporations, Capital Mobility and the Global Neo-Liberal Regime: Effects on Northern Workers and on Growth Prospects in the Developing World.   Seoul Journal of Economics

Kar, Dev and Devon Cartwright-Smith (2009). Illicit Financial Flows from Developing Countries 2002–2006. Global Financial Integrity. Available at www.gfip.org/storage/gfip/documents/executive - final version 05-14-09.pdf (August 2009).

Markle, K. (2015). A comparison of the tax‐motivated income shifting of multinationals in territorial and worldwide countries. Contemporary Accounting Research, 33(1), 7-43.

 

OECD (2007).  Revenue statistics 1965–2006. October 2007, table A, p.19

 

OECD (2009a).  Development assistance at its highest level ever in 2008. Published 30.3.2009 at

www.oecd.org/document/35/0,3343,en_2649_34487_42458595_1_1_1_1,00.html (August 2009)

 

OECD (2009b). A progress report on the jurisdictions surveyed by the OECD Global Forum in implementing the internationally agreed tax standard. Published 3.9.2009. Available at www.oecd.org/dataoecd/50/0/43606256.pdf (September 2009).

 

OECD (2009c). Tax Information Exchange Agreements. Available at www.oecd.org/document/7/0,3343,en_2649_33767_38312839_1_1_1_1,00.html (October 2009.

Krugman, Paul R. and Robert Z. Lawrence, 1994.  Trade, Jobs and Wages. Scientific American, April, 1994, Vol. 270. No. 4. pp. 44-49.

Organisation for Economic Co-operation and Development (2013). Action Plan on Base Erosion and Profit Shifting (Paris).

Princeton Studies International Finance (1996).Foreign Direct Investment and Capital Flight.

Kofi Annan African Progress Report, 2013. Equity in extractives: Stewarding Africa's natural resources for all. A Report Presented in Africa Progress Panel held in Cape Town, South Africa on May 10, 2013.

 

Krugman, Paul R. and Anthony, V (1995). Globalization and the Inequality of Nations NBER Working Paper, no. 5098.

   Service Centre for Development Cooperation (2010). Illegal Capital Flight from Developing Countries, r Series: 101,ISSN: 1236-4797 ,ISBN: 978-952-200-145-0

 

Rabah, A, Gregoire, R.G, and Lemma, W; Senbet (2014), African Economic Research Consortium and University of Maryland (Senbet), CERDI-CNRS and FERDI (Rota-Graziosi).

 

Service Centre for Development Cooperation, 2010. Illegal Capital Flight from Developing Countries, Series. pp: 101.

 

U.S. Senate Permanent Subcommittee on Investigations–Committee on Homeland Security and Governmental Affairs. 2011. Repatriating offshore funds: 2004 Tax Windfall for selected Multinationals.

 

The World Bank Group’s Response to Illicit Financial Flows: A Stocktaking (2015)

 

 IMF’s  data on FDI  on Balance of Payments Manual (1993).

Cite this Article: