Faculty: Social Sciences
Department: Economics


Uzoechina, B. I;
Nwogwugwu, U. C. C;


Although, economic crimes (Illicit Financial Outflows as proxy) are not new phenomena in Nigeria, however, their size, sophistication and magnitude have changed in recent times. Illicit financial outflows refer to unrecorded capital outflows that derive from corruption (bribery and theft by government officials), commercial mis-invoicing, and criminal activities such as drug trafficking, smuggling etc. Theoretical literature on economic crimes and economic growth has generated a rich debate over the last few years producing scholars who theorized that economic crimes could be growth-enhancing and others who see it as growth-reducing. Where is Nigeria in this great debate? There is a yawning gap in empirical literature that has to be filled in order to answer this question convincingly. The persistence of economic crimes with remarkable changes during the uninterrupted democratic dispensation period in Nigeria despite the efforts of government to curb them and their almost similar and general upward trend with some macroeconomic indicators such as the GDP provided the motivation and scope for this study. The first step towards determining why economic crimes have persisted despite government’s efforts to curb them lies in the determination of the nature of the relationship between economic crimes and growth of the Nigerian economy, which has left a wide gap in most empirical works reviewed. This failure to determine the nature of the relationship between economic crimes and economic growth has also limited the choice of methodology employed by previous empirical works on Nigeria. This study is an attempt to offer a better methodology in the estimation of this relationship. Furthermore, a significant challenge faced by empirical works on Nigeria is the choice of proxy for economic crimes. Most of the empirical works reviewed used corruption perception index, which is subjective in nature with very short time points, as proxy for economic crimes and suggested that the direction of causality is from economic crimes to economic growth and not vice versa. Definitely, a variable that is largely objective and has larger time points is preferable to the one that is subjective. Therefore, this study aims at providing robust econometric analysis, which deepens the understanding of the relationship between economic crimes and economic growth in Nigeria both in the short run and long run within the uninterrupted democratic dispensation period of 1999 to 2013 using OLS and Time-Varying State-Space Methodology. It is believed that this will shed brighter light on the impact of economic crimes on the Nigerian economy. Findings show a strong evidence of non-linear significant relationship between economic crimes and economic growth in Nigeria and this relationship is devastating on the economy in the long-run with infinitesimal short run impact which is why there has been lack of genuine commitment in the fight against economic crimes in Nigeria. The study also found a bi-directional causal relationship between economic crimes and economic growth in Nigeria and recommends, amongst others, a matrix of policies that address effective reduction of economic crimes, which includes heavy investment in infrastructure especially energy which nourishes industrial build-up that in turn creates employment as well as reduce the level of poverty.