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What is capital flight in macro-economics and how it affected Nigeria's economy in 2019

captainKAY
Business | Businesses
Capital flight is mainly the concept of heavy outflow of capital from a country's economy. Capital flight is mostly induced by instability in a given country.


Instability that may cause capital flight arises from a nations experiencing events such as political or economic instability, currency devaluation or the imposition of capital controls.

It can also be explained that capital flight also includes the transfer of capital from one country to another. Ussually caused by lowering and devaluation of a country's currency which in turn makes further investment in that country unattractive.

Early 2019, Nigeria's election of president Muhammadu Buhari came under a lot of sceptism by the investor community on how much change will come to the Nigerian economy, largely due to potential risks of instability among possible sweeping radical changes in the economic engines of the economy, should the incubent loose to Atiku Abubakar who was directly vying for the presidential seat.

Reports states that during this election period - Nigeria faced a capital drain of $13Billion. Which inherently demonstrates lack of faith and constancy in the sustainability of the Nigerian economy- pointing out that the country's economy is and its politics are not mutually exclusive.

Consequently, causing a potential increase in taxes by the Federal Government to shock and mitigate losses experienced. As basic commodities and charges on basic imports increases.

It is noteworthy that, building an economy independent of politics is impossible but can be mitigated largely by having the economy run on its own engines sustainably at some levels to prevent complete or irredeemable loss of investor confidence 'erosion of capital' which almost always doesn't come back.



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