External debt and capital flight:: Nigeria's experience (1970-1990)

The debt cri.sis has contri..butedl to economic difficulties and political conflicts in Nigeria. Often lost in the-POlicy debates and·political struggles about the crisis has been this central fact that there is a coexistence of massive capital flows in both directions. Capital flight which is the exit of residents# own capital rom the domestic economy was measured as a residual from t ;-:., balance of payments equation which·· equated the source of finance to their uses. The relationshi..p between external debt and capital flight on the one hand and other factors determining them was elucidated by multiple regression models.
The regression results support the hypothesis that debt fueled capital fli.ght. and flight-fueled· externat ·debt or borrowi.ng were important aspects o-f the Nigeria's experi.ence in the study period. 8y inference, capital i'light imposes ,growth cost, erodes the tax base,. worsen income distr-ibui:ion and constitutes the single major factor keeping Nigeria in her present debt problems. Consequently, the solution ta Nigeria's external indebtedness is laèated within the penacea to the capital flight syndrome.