Analysis of Foreign-Aid Capital Flight Transmission Mechanism in Nigeria Using the Corruption Route

Abstract

This study analyzed the transmission mechanism of capital flight and foreign aid in Nigeria using the corruption route. The study was anchored on the gaps model of foreign aid and portfolio choice model of capital flight. The ex-post facto design and a quantitative technique were employed in which econometric tools were used to analyze the data collected from the secondary sources about the variables from 1986 to 2021. Descriptive statistics were used to describe the properties of the data set, followed by testing for the stationarity properties of the time series used. The Structural Vector Autoregressive (SVAR) model was used to account for the transmission mechanism. The findings of the study revealed that foreign aid responds to capital flight through the corruption route in Nigeria. The study concluded that corruption remains an efficient route for the transmission of foreign aid to capital flight in Nigeria. The study therefore recommended amongst others that the Economic and Financial Crimes Commission (EFCC) and The Independent Corrupt Practices and Other Related Offences Commission (ICPC) should beam their searchlight on foreign aid funds to track corrupt individuals who enrich themselves with the funds that usually transmit to capital flight from Nigeria.