This study investigates the impact of money laundering on economic development in Nigeria, a country grappling with significant challenges posed by illicit financial flows. Money laundering, defined as concealing the origins of illegally obtained funds, typically involves three stages: placement, layering, and integration. In Nigeria, an estimated $15.7 billion is lost annually to money laundering activities, severely undermining economic growth and public trust in financial institutions. This research highlights the various mechanisms criminals employ, including shell companies and false invoicing, which facilitate the diversion of resources from legitimate economic activities. The implications of money laundering extend beyond mere financial losses; they contribute to increased corruption, political instability, and socioeconomic inequality. The study emphasises the urgent need for robust anti-money laundering (AML) policies and regulatory reforms to protect Nigeria's financial system and promote sustainable economic development. By addressing these challenges, Nigeria can enhance its prospects for stability and growth while safeguarding the welfare of its citizens.