Capital flight and unemployment in Nigeria : an empirical investigation

Abstract

The growth rate of unemployment in Nigeria is becoming an issue of great concern therefore calling the attention of stake holders to seeking solution to it. On the other hand, capital flight is another issue that has generated great concerns among economists with regards to its growth over the decades particularly in developing countries of which Nigeria is one on the top of the list as shown in the literature. Given these, it is highly essential that the attendant effects of this incredible growth of capital flight are found, however some of these effects are already mentioned in the literature. Given the growth rate of unemployment in Nigeria and the failure of many policies prescribed by the government of Nigeria to curb it, it has therefore become very clear that there are still more factors contributing to unemployment than the ones known. Solving the unemployment problem demands the knowledge of all factors contributing to it. In this paper, capital flight is identified as one of the factors contributing to unemployment in Nigeria. The Ordinary Least Squares Method including Co-integration and Error Correction Mechanism (ECM) were used to investigate this assertion. It was found that in the short run, capital flight contributes positively to unemployment in both current and next years while in the long run, it only contributes positively in the current year while contributing negatively in the next year but leaving an unemployment gap as the contribution of the current year is greater than that of the next year.