CAPITAL FLIGHT AND THE PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA

ABSTRACT

This research investigates the relationship between capital flight and the performance of deposit money banks in Nigeria over the period 2010-2020. Capital flight, characterized by the illicit outflow of capital from a country, has been a persistent issue in many emerging economies, including Nigeria. The study employs a comprehensive analysis of economic data, regulatory policies, and banking performance indicators to examine the impact of capital flight on the stability and profitability of deposit money banks. Four major capital flight variables such as foreign direct investment outflow, foreign portfolio investment outflow, foreign remittances outflow, and official development assistance outflow, as well as three exogenous control variables, which are real gross domestic product (RGDP), inflation rate, and exchange rate were used as the explanatory variables, with a composite efficiency index used as the dependent variable. The panel least squares technique was utilized to empirically analyze the model. The empirical results show that capital flight(i.e. foreign direct investment outflow, foreign portfolio investment outflow, foreign remittances outflow, and official development assistance outflow) have negative and significant impact on the performance of deposit money banks in Nigeria. Foreign direct investment outflow is negatively related to the performance of deposit money banks. Further evidence shows that foreign remittances outflow is positively related to the performance of deposit money banks in Nigeria.