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. 3 NO. 7 2017

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Does Stock Market Performance Influence Capital Flight from Nigeria?

Kingsley O. Onyele, Confidence C. Opara & Eberechi B. Ikwuagwu

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Abstract

The study sought to find whether stock market performance influence capital flight from Nigeria. To achieve this objective, time series data obtained from Central Bank of Nigeria Statistical Bulletin from 1985 to 2015 were analyzed. For the data analysis, Augmented Dickey-Fuller unit root test, Johansen co-integration test, vector error correction mechanism, Granger causality test and Cholesky ordering variance decomposition were used. Having tested for unit root, it was found that all the variables were integrated at their first difference. The Johansen co-integration test revealed that the measures of stock market performance; i.e. all share index, market capitalization, total new issues and value of shares traded had long run relationship with capital flight. It was also found that all share index, market capitalization and total new issues significantly influenced capital flight from Nigeria in the short run. The Cholesky ordering variance decomposition showed that the long run shock to all share index was most prominent in influencing capital flight. Based on these findings, it was recommended inter alia that stability in the macroeconomic environment be maintained towards enhancing investors’ confidence such that would attract both domestic and foreign investors to hold their equity investments in the Nigerian Stock Market.

keywords:

Capital flight, market capitalization, all share indexes, value of shares traded and total new issues.

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