## 4.1 The Augmented Dickey Fuller (ADF) Test Result

From table below, the Augmented Dickey Fuller (ADF) test result shows that all variables are stationary only at first difference, which means the variables are integrated at order one. This is due to the fact that the probability values of the ADF test statistics are less than 0.05 and that the ADF test statistical values are greater than the MacKinnon critical value at 5 per cent significance level. Hence, the error correction method of estimation was adopted.

## 4.2 Model One (1) Determinants of Capital Flight in Nigeria

## 4.2.1 Johansen Co-integration Test for model (1)

The Johansen co-integration test was used to test for the existence of a long run relationship among the variables in this model. The result of the co-integration test as presented in the table below shows that co-integration exists in this model.

## 4.2.3 Error Correction Result for Model One (1)

The error correction coefficient is given as -0.711684 and its corresponding probability value is 0.0024. This means the ECM is negative and statistically significant which conforms to theoretical expectations. The R2 is given as 0.765420 which means that about 77% of changes in the dependent variable, capital flight can be explained by the independent variables used in the model. The probability value of the F-statistic (0.000194) suggests that all the independent variables are jointly significant in determining changes in capital flight. Also, the Durbin-Watson statistics at 1.984100 indicate the absence of autocorrelation. The short run result revealed that exchange rate has a positive relationship with capital flight meaning that a depreciation of the naira leads to an increase in capital flight. This relationship conforms to apriori expectations and is similar to the findings of Ayodele (2016).External debt in the current period has a negative relationship with capital flight while in the first lag, external debt has a positive relationship with capital flight in Nigeria which is similar to the finding of Ameen *et al *(2016) and Chukwuemeka (2014). Foreign direct investment has a negative relationship with capital flight in the current period while in the first lag, the relationship is positive and insignificant which is similar to the findings of Saloum (2011). Current account balance has a negative relationship with capital flight indicating that a current account surplus will lead to a decline in capital flight in Nigeria. For interest rate, it has a negative and significant relationship with capital flight in the current period. In the lagged period however, interest rate has a positive and statistically insignificant relationship with capital flight. Finally, the short run result indicated that reserves have a negative relationship with capital flight. This implies that an increase in reserves will lead to a decline in capital flight in the country.

## 4.2.4 Residual Diagnostic Test Result

From the residual diagnostics test result presented in the table below, it is clear that the errors in this model are normally distributed and there is an absence of serial correlation and heteroscedasticity in the model. The CUSUM test result also shows that the variables are stable in the long run.

## 4.3 Effect of Capital Flight on Economic Growth (Model Two)

## 4.3.1 The Johansen Co-Integration Test for Model (2)

The Johansen co-integration test was used to test for the existence of a long run relationship among the variables in this model. From the result of the co-integration test as presented in the table 4.3.1 below shows that, the Trace test and the Max-Eigenvalue test shows that co-integration exists in this model.

## 4.3.2 Error Correction Model for Model Two (2) (Short Run Analysis)

The error correction term has a coefficient given as -0.136009 and its corresponding probability value is 0.0000. This means the ECM is negative and statistically significant at the 5% level of significance, thereby conforming to theoretical expectations. The value of the R2 is given as 0.889096 which means that about 89% of changes in the dependent variable, GDP can be explained by the independent variables used in the model. The probability value of the F-statistic (0.00000) suggests that all the independent variables are jointly significant in determining the GDP. Also, the Durbin-Watson statistic has a value of 1.837050 which signifies that there is no autocorrelation.

The short run result shows that GDP in the past period determines GDP in the current period. Capital flight in the current period and the first lag has a negative and significant relationship with GDP. It implies that as capital flight increases, economic growth declines. This relationship conforms to apriori expectations and is similar to the findings of Igwemma (2016), Bakare (2011) and Ayoola (2018) where a negative relationship was found to exist between capital flight and economic growth in Nigeria. External debt also has a negative relationship with capital flight. Its relationship is however statistically insignificant. The coefficient of -0.255434 means that if external debt increases by one per cent, GDP will decline by about 26%. External debt in the lagged period has a positive and significant relationship with capital flight which implies that a one per cent increase in external debt will increase GDP by about 12%. FDI has a positive and statistically significant relationship with GDP in the current period while in the first lag; FDI has a negative and insignificant relationship with reserves. This is due to the fact that the FDI inflow is used for unproductive purposes which do not contribute to economic growth and also because of corruption and conversion of these funds for personal use.

## 4.3.3: Residual Diagnostic Test Result

From the residual diagnostics test result presented in the table 4.3.2 , it is clear that the errors in this model are normally distributed and there is an absence of serial correlation and heteroscedasticity in the model. The CUSUM test result also presented in the in figure 4.3.2 shows the variables are stable in the long run.

## 4.4 For Model Three (3) Effect of Capital Flight on Investment

## 4.4.1 The Johansen Co-Integration Test Result for Model Three (3)

In examining the effect of capital flight on investment in Nigeria, the Johansen co-integration test was used to test for the existence of a long run relationship among the variables since the variables are stationary at first difference. From the co-integration result presented in table 4.4.1 below, the Trace test as well as the Max-Eigen value test indicated the presence of one co-integrating equation each, which confirms the existence of a long run relationship among the variables.

## 4.4.2. Error Correction Model Result for Model Three (3) (Short Run)

From the short run result, the value of the R-squared is 0.912941 meaning that changes in investment can be attributed to changes in the independent variable by about 91%. The probability value of the F-Statistic which is 0.000000 implies that the independent variables adopted are jointly significant in determining investment. Also, the Durbin Watson statistic is 1.543314indicating the absence of autocorrelation in the model. The coefficient of the error correction term is given as -0.121754 and its corresponding probability value is 0.0312. This means the ECM is negative and statistically significant at 5% level of significance, thereby conforming to theoretical expectations.

The short run results further shows that investment in the lagged periods has a positive and insignificant relationship with investment in the current period. This means that investment in the past years have a positive effect on present value of investment. Capital flight in the current period as well as its one year lag period has a negative and statistically significant relationship with investment. This implies that as capital flight increases, investment decreases by about 62 per cent in the current period and by about 12 per cent in the first lag. This relationship conforms to apriori expectations and is similar to the findings of Kabiru (2018) and Ajayi (2012). External debt in the current year has a negative and insignificant relationship with investment in Nigeria. This means that as external debt increases, investment decreases. In the one period lag however, external debt has a positive and significant relationship with investment which is similar to the findings of Ameen *et al *(2011). Foreign direct investment in the current year as well as the one period lag has a positive and significant relationship with investment in Nigeria. This relationship conforms to apriori expectations and implies that an increase in foreign direct investment into the country leads to a corresponding increase in investment in Nigeria.

## 4.4.3 Residual Diagnostics Test Result for Model Three (3)

The residual diagnostics test result presented in table 4.4.3 below shows that the residuals are normally distributed, there is an absence of heteroscedasticity and serial correlation in the model and that the variables are stable in the long run given the CUSUM test result.

## 4.5 Discussion of Results

The results from this study revealed that exchange rate positively affects capital flight. That is, a rise in exchange rate which is depreciation will lead to an increase in capital flight. It also shows that an increase in external debt and foreign direct investment will lead to a decline in capital flight.

Furthermore, an increase in the current account balance will lead to a decline in capital flight by about 10 per cent in the present period. Interest rate has a negative relationship with capital flight implying that an increase in the deposit rate of interest will cause capital flight to decrease. It is also evident from the results that an increase in reserves will lead to a decline in capital flight in Nigeria.

In examining the effect of capital flight on economic growth in Nigeria, the study found out that capital flight negatively affects economic growth. It also shows that external debt negatively affects economic growth in Nigeria while foreign direct investment has a positive relationship with economic growth. On the effect of capital flight on investment, empirical results from this study revealed that capital flight negatively affects investment and that external debt also negatively affects investment in Nigeria. Foreign direct investment on the other hand has a positive relationship with investment in Nigeria.