IIARD International Institute of Academic Research and Development

IIARD International Journal of Economics and Business Management (IJEBM )

E-ISSN 2489-0065
P-ISSN 2695-186X
VOL. 11 NO. 2 2025
DOI: 10.56201/ijebm.vol.11.no2.2025.pg16.32

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Deterring Capital Flight from Africa through Improvement in Quality of Governance

B A Adeniyi, PhD

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Abstract

The need to provide further in-sight on how alternative indicators of quality of governance determine capital flights from African countries serve as impetus for this study which not only investigated the effects of alternative indicators of quality of governance (when they were bundled as done by most previous studies) on capital flight statistics but also examined the effect of each of the indicator individually (which no known study had done). To achieve this, capital flight statistics computed by various methods as presented in Table A1 in the appendix were used as the dependent variables while indicators of quality of governance sourced from the World Bank Governance Indicators (WGI) database of the World Bank served as the independent variables. Also, the investment diversion theory of capital flight was adapted as the theoretical framework upon which the models that were estimated in this study were derived. The findings of the study revealed that five out of the ten governance indicators that were tested has the expected negative effects; two of the remaining five has the unexpected positive effects while each of the remaining three has no effect. Following from this empirical evidence, it is concluded that quality of governance has varying deterring effects on capital flight.

keywords:

Capital Flight, Governance Indicators, African Countries

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APPENDIX
Table A1: Capital Flight by Countries: 1985-2020 mean Values in 2020 constant US$ Billions,
Computed
under the Seven Methods of HOT, WB, MISINV, HWM, HM, HW and MW
Countries
HOT
WB
MISINV
HWM
HM
HW
MW
1
Algeria
-9.75
1.52
4.72
2.82
2.28
2.00
4.95
2
Angola
-7.58
9.61
12.6
8.59
3.83
6.36
15.19
3
Benin
-6.31
0.11
0.15
0.22
0.19
0.19
0.18
4
Botswana
-6.23
0.27
-1.1
-1.11
-1.46
-0.94
-0.93
5
Burkina Faso
-5.98
0.11
-0.59
-4.99
-5.98
-5.01
-0.51
6
Burundi
-1.28
0.12
0.32
0.53
0.54
0.48
0.34
7
Cameroon
-0.82
0.09
0.92
1.13
1.26
0.99
0.89
8
Cape Verde
-0.34
0.01
0.38
0.15
0.16
0.08
0.36
9
Central African
Republic
-0.3
0.07
0.19
0.08
0.05
0.05
0.2
10 Chad
-
1.66
0.23
1.54
0.77
1.51
0.81
11 Comoros
-
-
0.04
0.08
0.1
0.08
0.04
12 Congo, Dem.Rep.
-
-1.19
0.78
0.26
1.04
0.14
0.31
13 Congo, Rep.
-
3.88
1.37
5.17
3.65
4.98
2.66
14 Cote d'Ivoire
-
0.55
-2.59
4.85
5.46
5.43
-2.23
15 Djibouti
-
0.53
1.84
1.91
1.89
1.61
1.91
16 Egypt
-
2.8
0.42
4.74
3.85
4.74
1.39
17 Equatorial Guinea
0.01
-
2.32
0.41
0.44
-
2.17
18 Eritrea
0.02
-
-
-
-
-
-
19 Eswatini
0.8
0.43
0.64
1.06
0.88
0.23
0.49
20 Ethiopia
0.04
-
8.18
5.39
6.21
4.02
7.65
21 Gabon
0.04
0.39
0.94
0.09
-0.16
-0.08
1.02
22 Gambia
0.06
0.08
0.19
0.18
0.16
0.15
0.21
23 Ghana
0.09
-0.6
8.98
5.4
6.59
3.9
8.18
24 Guinea
0.09
-0.44
4.05
1.39
1.83
0.69
3.63
25 Guinea-Bissau
0.13
0.41
-0.13
5.14
5.85
5.28
0.02
26 Kenya
0.16
-1.77
1.11
1.47
2.84
1.33
0.41
27 Lesotho
0.21
-0.29
0.43
0.1
0.29
0.02
0.3
28 Liberia
0.32
-0.92
1.97
-0.11
0.41
-0.45
1.51
29 Libya
0.36
-0.85
5.61
-7.52
-8.52
-8.71
4.94
30 Madagascar
0.49
-0.06
3.98
0.68
0.75
-0.03
3.7
31 Malawi
0.55
-3.26
4.24
3.82
6.5
3.18
2.8
32 Mali
0.66
0.03
0.91
0.63
0.71
0.48
0.85
33 Mauritania
0.84
-0.19
1.75
1.12
1.41
0.83
1.57
34 Mauritius
0.74
-1.51
2.91
-0.27
0.57
-0.79
2.18
Source: Author`s Computation, 2022. Explanatory Notes: The acronyms HOT, WB,
MISINV, HWM, HM, HW and MW respectively stand for the average values of capital flight
computed with Hot-Money method, World Bank method, Trade Mis-invoicing method,
HWM method, HM method, HW method and MW method respectively.
35 Morocco
0.91
0.01
6.67
1.89
2.08
0.72
6.24
36 Mozambique
1.09
0.18
1.38
2.93
3.33
2.75
1.35
37 Namibia
1.10
-1.72
0.45
-1.08
-0.21
-1.17
-0.19
38 Niger
1.11
-0.05
1.02
0.42
0.51
0.24
0.94
39 Nigeria
1.34
11.29
2.74
14.52
10.03
14.21
6.57
40 Rwanda
1.41
-5.32
0.55
-9.01
-7.34
-9.25
-1.38
41 Sao Tome and Principe
1.48
-
0.19
0.08
0.09
0.05
0.18
42 Senegal
1.57
0.22
0.02
0.42
0.36
0.42
0.1
43 Seychelles
1.63
-0.01
0.51
0.09
0.1
-0.01
0.47
44 Sierra Leone
2.68
-1.36
1.36
3.92
5.48
3.79
0.79
45 Somalia
3.13
-
0.35
0.06
0.07
-
0.33
46 South Africa
3.84
-
-1.87
-1.01
-1.16
-0.69
-1.75
47 South Sudan
3.45
-
-
-
-
-
-
48 Sudan
4.75
-6.57
6.77
-7.51
-4.92
-8.84
3.99
49 Tanzania
4.98
0.01
0.25
1.16
1.36
1.14
0.24
50 Togo
5.32
-0.06
1.94
0.35
0.41
0
1.79
51 Tunisia
5.98
-0.13
9.24
2.93
3.34
1.31
8.59
52 Uganda
6.06
0.99
10.18
2.89
2.57
1.09
9.87
53 Zambia
7.02
5.11
0.75
-2.3
-5.98
-2.56
2.52
54 Zimbabwe
9.69
7.28
0.09
9.7
6.91
9.81
2.67
Average
0.75
0.39
2.12
1.21
1.14
0.84
2.11

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