Capital Flight to Savings Gap in Nigeria: An Assessment of the Socio-Economic Determinants

Capital Flighthas long been recognized as a problem for developing nations. Savingsgap in some of these nations has widened over the years due to rising Capital Flight. This has limpeddomestic investment growth, employment creation and poverty alleviation. With these in view, this study seeks to underscore the socio- economic determinantsof Capital Flightin Nigeria. Approaching the study, two measures of Capital Flight( hot moneymethod and residual method) are modeled against a number of socio-economic factors identified in the literature. Fully Modified Ordinary Least Square, Seemingly Unrelated Regressionand Error Correction Mechanism are employed to sieve out the significant determinants of Capital Flightin Nigeria. Amongst the host, only lagged Capital Flight, fiscal balance and exchange rate are found to be the significant determinants of Capital Flightin the country. The study concludes that unless sound macroeconomic measures are taken to address these factors, Capital Flightwill remain high in Nigeria. Domestic investment will remain very low. Poverty levels will remain high, and the quest for economic development will remain elusive. The key out of Nigeria’s colossal savings gap is keeping domestic capitalat home. This is achievable using the strategies discussed in the study.