The impact of capital flight on cconomic development: Ghana and Nigeria compared

Thesis submitted to the Department of Business Administration, Ashesi University College, in partial fulfillment of Bachelor of Science degree in Business Administration, April 2016This study examines the relationship between capital flight and economic development in Africa by focusing on the impact of capital flight on economic development in Nigeria and Ghana. Existing literature on the phenomenon of capital flight, has focused almost exclusively on exploring the relationship between capital flight and economic growth instead of economic development. The preponderance of that literature indicates that a negative relationship exists between capital flight and economic growth. Using a combination of regression, correlational, graphical and descriptive analyses secondary data collected from sources such as the World Bank on capital flight and indicators of development were analysed. Capital flight estimates for Nigeria and Ghana (1990-2014) were computed using the World Bank's residual method. The main findings of this study are: (i) Total capital flight is more severe in Nigeria as compared to Ghana in terms of magnitude. On a per capita basis, however, capital flight is much worse in Ghana. (ii) There is a negative and statistically significant relationship between capital flight and economic development for Nigeria but the relationship is positive and statistically significant for Ghana. Results seem to suggest that although capital flight seems to negatively impact development in Nigeria but not in Ghana, it may be that it is the totality (not the per capita) of capital flight that matters in terms of impact on development. Thus, African governments must take steps to minimize capital flight so that their paths to economic development is accelerated to ensure the wellbeing of their citizens.Ashesi University Colleg