An Emperial Investigation of Capital Flight in Selected African Countries

In recent years, developing countries have been experiencing massive capital flows. While capital flows are normal features of modern international trade transactions, what makes the flows from developing countries problematic is that they are flowing from those countries which need them most. It is in the sense that these flows can be described as abnormal or capital flight. Several attempts have been made to analyze the phenomenon of capital flight from developing countries but only a few of these have been on Africa. The present study using Côte d'Ivoire, Morocco and Nigeria as case studies, is aimed at filling that gap. The paper found that a sizable amount of capital flight took place in these countries during the sample period. It also found that domestic factors (eg. overvaluation of national currencies, domestic economic instability) and external factors (eg. external reserves, debt service ratio) largely explain capital flight from these countries. The existence of a sizeable amount of capital flight is indicatives of a policy problem, which alls for appropriate policy responses. Perhaps the single most important policy response to capital flight is the restoration of confidence in the domestic economy. Confidence building includes, among other things, the pursuit of credible and sustained, growth-oriented macroeconomic policies.