The terms that are listed below occurred frequently in this work. Some of the constructs are found in development economics and international finance. Efforts are made to interpret their full meaning here by everyday normal English. Explanations are provided as to the intended meaning of the words and where it is possible synonyms will be used.
Balance of Payments: This is a record of economic transactions between one country and the rest of the world often reported on yearly or fairly more frequent but regular basis. It does not report assets held by a country but the flows of such assets.
Capital: One of the factors of production that can be used to produce other goods without being fully consumed. It can be saved for future consumption. It generates return in form of interest, rents and profits. It can also held in various forms. It is sometimes synonymously used to represent money to be used in business.
Capital flight: The term means the movement of capital on a continuous basis out of one country to another in order to escape losses or for some other purposes. It is a term used to mean the leakage of financial resources out of an economy.
Capital flows: this means the movement of capital or money meant for business from one nation to another. The term means that the capital can move depending on business opportunities and adequate return on it.
Corruption: A common term used to mean the abuse of one’s office for unjust and illegitimate enrichment not necessarily for pecuniary gains. It connotes the improper usage of one’s position or office for personal gains and is illegal in all countries of the world though tolerated in some countries than others.
Errors and Omissions: This is the statistical discrepancy usually used to balance the BOP. It is not abnormal if the BOP does not balance and therefore an entry must be made that would allow it to balance. The other name for it is statistical discrepancy. It is often caused by a number of factors which could either be deliberate or otherwise.
External Reserves: The stock of assets available to the country in foreign currency and held by the Central bank of such a country. It is generally used to meet external payments. It could be kept in form of cash, but more often invested in negotiable instruments.
Financial Instruments or Claims: These are assets held by investors that are capable of yielding returns for the holder. They are investment instruments that can be bought or sold in the capital markets that are recognized.
Foreign investment: This is investment made by an entity of one country in another country. It usually involves moving money out of the domestic economy and using the money to generate returns in another country.
Globalization: A process that is ongoing that allows country to open up to the outside world that allows ideas, resources, goods and services to flow into it. It connotes the idea of interdependency of countries on one another.
Gross Domestic Product. The overall measurement of nation’s wealth and stock of assets. The GDP is a very important variable in macroeconomics that enables the capital formation process to be recorded. Variations of the GDP are used where the GDPPC is used for Gross Domestic Product per Capital and RGDP is Real Gross Domestic Capital or GDP at constant price
LATAM (countries) These are the countries of south America that have experienced capital account and financial crises, notably Argentina, Mexico Chile and Brazil
Liberalization: The term occurs frequently to mean the removal of restrictions from a process or system in order to allow free and unfettered transactions. The usage is in connection with the current and capital account of the Balance of Payments.
Misinvoicing: A term used in international trade and finance that allows an importer or exporter to make inappropriate gains by inflating the value of imports and deflating or reducing the value of exports so that he would keep the difference in another bank.
Risk: This is a term used in finance to mean the variability or deviation of actual returns from the expected. This normally means that the probability of earning expectations may not be met or may be surpassed. Riskier investments are prone to losses and usually accompanied by high returns when successful. Risk in holding investments is emphasized here in terms of the possibility of expropriation, loss of capital value as a results of nationalization polices and devaluation of domestic currency. These attendant risks exist in holding of assets in a particular currency or country.
Transnational (TNC) or Multinational (MNC) Corporation: These are international companies operating in many countries and have their head offices in developed countries. They are associated with overseas investment or strategic diversification, which involves transferring into the host country initially, but may transfer resources in form of profits to home countries in subsequent years. They are ambiguously referred to as Multinational Corporations (MNCs) though strictly speaking not the same. Transnationals have shareholders of the firms diffused through many countries in which they may be operating which may not be case for Multinationals
ABRIDGED CAPITAL FLIGHT DATA ₦’ Million (1970 – 2007)