INFLUENCE OF CAPITAL FLIGHT ON BUDGET IMPLEMENTATION IN NIGERIA

The subject of budgeting in Nigeria has been a yearly affair which though good in content, but without an appreciable result. Consequently, this study examined the effect of capital flight on budget implementation in Nigeria. To achieve this broad objective, co-integration test and vector error correction were employed for the analysis using time series data spanning from 1986 to 2014. The dependent variable (budget implementation) was proxied by aggregate government expenditure, while the independent variables were capital flight, external debt, government revenue, economic openness, and real exchange rate. The co-integration results revealed that a long run equilibrium relationship existed among the variables. The error correction term indicated a rapid realignment to long run convergence by approximately 87 percent. The results further showed that capital flight was positive and significant in influencing government expenditure in Nigeria. Also, the Wald test showed that there is a significant short run causal relationship between capital flight and government expenditure in Nigeria. Based on these findings, the study recommended inter alia that government should set up a vibrant monitoring team to ensure that funds allocated for various projects are used efficiently.