IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
VOL. 9 NO. 9 2024
DOI: 10.56201/ijefm.v9.no9.2024.pg84.101

---

Effect of External Financing on Stock Markets post-COVID 19 Recovery in Selected African Countries

Samuel Ochinyabo, Abubakar Sule and Alih Yusuf

---

Abstract

This study seeks to examine the effect of external financing on stock markets post-Covid-19 recovery in selected African countries using quarterly time series data from 2015Q1 to 2022Q4. This study did a comparative analysis using bivariate model for the individual countries. The Nairobi stock exchange in Kenya had its market capitalization adversely affected by the coronavirus pandemic given that foreign portfolio investment and foreign direct investment also decreased in that period. The Nigeria Stock Exchange capital market capitalization was not significantly affected by the COVID-19 pandemic. Although foreign portfolio investment was not forthcoming in the face of a depreciating currency and a negative governance quality variable in the pandemic era. The Johannesburg Stock Exchange was affected by the COVID-19 pandemic. But, then the inflow of capital inflows into the country did not influence stock market recovery after the pandemic era. The continued fluctuations in external financing will continue to affect global stock markets, so stock markets in Africa must put in place a conducive financial environment to attract these foreign capital inflows for investment.

keywords:

External financing, Stock market, COVID-19, Stock market capitalization, capital

---

References:

Abubakar, M., and Danladi, Y.U. (2018). Foreign Direct Investment and Stock Market
Development in Nigeria: Evidence from ARDL Bound Test Approach to Cointegration.
Journal of Economics and Finance, 79-85.
Adam, A.M., and Tweneboah, G. (2008). Foreign Direct Investment (FDI) and Stock market
Development: Ghana Evidence. Munich Personal RePEc Archive (MPRA), 2-8.
Aregbeshola, R.A. (2016). The Relationship between Capital Market Development and Inflow of
Foreign Direct Investment to Africa – a VECM-conditioned Impulse. Kasmera, 44(1 ),
452-470
Awoleye E.O. and Dada J.T. (2018). Financial Liberalization and Stock Market Volatility in
Nigeria. ICAN Journal of Accounting and Finance (IJAF), 7(1), 51-60.
Awoleye, E.O., (2022). Foreign Capital Inflows and Stock Market Development in Nigeria: An
Asymmetric Causality Approach. Signifikan: Jurnal Ilmu Ekonomi, 11(2), 339-354.
Baleseng, A., Juana, J. S., and Gamariel, G. (2016). Empirical Analysis of Determinants of Stock
Market Capitalisation: The Case of Botswana Stock Exchange 2005–2012.
Bartels, F.L., Alladina, S.N. and Lederer, S. (2009). Foreign direct investment in Sub-Saharan
Africa: Motivating factors and policy issues. Journal of African Business, 10(2), 141–162.


Bayar, Y., and Gavriletea, M.D. (2018). Foreign Direct Investment Inflows and Financial
Development in Central and Eastern European Union Countries: A Panel Cointegration and
Causality. International Journal of Financial Studies, 6(2), 55.
Calderon, C., and Nguyen, H.M. (2015). Do Capital Inflows Boost Growth in Developing
Countries? Evidence from Sub-Saharan Africa. Policy Research Working Paper 7298,
World Bank, Washington, DC.
CBN (2016). Understanding monetary policy and financial concepts. Monetary Policy
Department, Central Bank of Nigeria, Abuja.
Edo, S. (2018). Private Capital Inflows and Stock Market Interface in Sub-Saharan Africa.
International Review of Economics, 65, 507-538.
Edo, S. (2018). Private capital inflows and stock market interface in sub-Saharan Africa.
International Review of Economics, 65, 507–538
Edo, S. (2018). Private capital infows and stock market interface in sub-Saharan Africa.
International Review of Economics, 65, 507–538
Ekeocha, D.O., Ogbuabor, J.E., Ogbonna, O.E. and Orji, A. (2023). Economic policy uncertainty,
governance institutions and economic performance in Africa: are there regional
differences? Economic Change and Restructuring, 56, 1367–1431
IMF (2007). International monetary fund handbook: its function, policies and operations, January.
Klagge, B. and Zademach, H.M. (2018). International capital flows, stock markets, and uneven
development: the case of Sub-Saharan Africa and the Sustainable Stock Exchanges
Initiative (SSEI)" Zeitschrift für Wirtschaftsgeographie, 62(2), 92-107.
Kose, M.A., Prasad, E., Rogoff, K. and Wei, S.-J. (2010). Financial Globalization and Economic
Policies. In Handbook of Development Economics, Vol. 5, edited by D. Rodrik, and M.
Rosenzweig, 4283–359. Amsterdam: North-Holland.
Laeven, L. (2014). ‘The Development of Local Capital Markets: Rationale and Challenges’. IMF
Working
Paper
2014/234.
Available
at:
https://www.imf.org/en/Publications/WP/Issues/2016/12/31/TheDevelopment-of-Local-
Capital-Markets-Rationale-and-Challenges-42551 (accessed September 2022).
Makoni, P.L., and Marozva, G. (2018). The Nexus between Foreign Portfolio Investment and
Financial Market Development: Evidence from Mauritius. Academy of Strategic
Management Journal, 17(5), 1-14
Makrelov, K, Davies, R. and Harris, L. (2019). The impact of capital flow reversal shocks in South
Africa: a stock- and flowconsistent analysis. South African Reserve Bank Working Papers,
WP/19/05
Muhammad, A.H., Muhammad, A.K., Shamila, S., and Shujahat, H.H. (2017). The impact of stock
market performance on foreign portfolio investment in China. International Journal of
Economics and Financial Issues, 7(2), 460-468
Nakagawa, S., and Psalida, E. (2007). The quality of domestic fnancial markets and capital infows.
Global Financial Stability Report, International Monetary Fund, pp 77–109
Ndiweni, Z.L. and Bonga-Bonga, L. (2021). Capital inflows and economic growth nexus in Sub-
Saharan Africa: evidence on the role of institutions. Munich Personal RePEc Archive
(MPRA) Paper No. 107392, 17 March 2021


Ndiweni, Z.L. and Bonga-Bonga, L. (2021). Capital inflows and economic growth nexus in Sub-
Saharan Africa: evidence on the role of institutions. Munich Personal RePEc Archive
(MPRA) Paper No. 107392
Njane, R. (2017). The Effect of Foreign Direct Investment on Stock Market Development in Kenya
(Thesis).
University
of
Nairobi.
Retrieved
from
http://erepository.uonbi.ac.ke/bitstream/handle/11295/103350/Njane_The+Eff
ect+of+Foreign+Direct+Investme
nt+on+Stock+Market+Developme
nt+in+Kenya.pdf?sequence=1
Nyang’oro, O. (2013). Portfolio fows and stock market performance in Kenya: case of Nairobi
Securities Exchange. In: Conference proceedings. Centre for the Study of African
Economies, Oxford
Nzenwata, A. (2017). Foreign Portfolio Investment and Stock Market Performance in Nigeria.
Research Midas.
Okafor, I.G., Ugochukwu, U.S. and Chijindu, E.H., (2016). Foreign capital inflows and Nigerian
economic growth nexus: A Toda Yamamoto approach. European Journal of Accounting,
Auditing and Finance Research, 4(3), pp.16-26.
Omorokunwa, O.G. (2018). Stock Market Performance and Foreign Capital Flow. Amity Journal
of Finance, 3(2), 24-41 2018
Omorokunwa, O.G. and Mbaka, B. (2021). Foreign capital inflows and stock market performance
in selected african countries. Journal of Academic Research in Economics,13(3), 509-535.
Raza, S.A., and Jawaid, S.T. (2014). Foreign Capital Inflows, Economic Growth, and Stock Market
Capitalization in Asian Countries: An ARDL Bound Testing Approach. Quality, and
Quantity: International Journal of Methodology, 48(1), 375-385.
Solow, R. (1956). A Contribution to the Theory of Economic Growth. Quarterly Journal of
Economics, 70(1), 65-94
Stein, H., & Rowden, R. (2022). THREE: Global Finance and the COVID-19 Pandemic in Africa.
In COVID-19, the Global South and the Pandemic’s Development Impact. Bristol, UK:
Bristol
University
Press.
Retrieved
Jul
28,
2023,
from https://doi.org/10.51952/9781529225679.ch003
Tetteh, I. A., and Gao, J. (2020). Analyzing the Effect of the COVID-19 on the Global Economy:
A Case Study of Its Influence on Africa’s FDI and Foreign Exchange Inflows. Open
Journal of Business and Management, 8, 2396-2401.
Thanh, S.D., Hoai, B.T., and Bon, N.V. (2017). Determinants of stock market development: The
case of developing countries and Vietnam. Journal of Economic Development, 32-53.
Tite, O., Ogundipe, O.M., Ogundipe, A.A. and Akinde, M.A. (2022). Analysis of foreign capital
inflows and stock market performance in Nigeria. Investment Management and Financial
Innovations, 19(4), 51-64.
Tsaurai, K. (2018). What are the Determinants of Stock Market Development in Emerging
Markets? Academy of Accounting and Financial Studies Journal, 22(2), 111-120.
Tsaurai, K. (2022). Determinants of foreign portfolio investments: BRICS as a unit of
analysis. Acta Universitatis Danubius. Œconomica, 18(3), 81-99
Weber, K., Davis, G.F., and Lounsbury, M. (2013) Policy as myth and ceremony? The global
spread of stock markets, 1980–2005. Acad. Manag. J., 52(6), 1319–1347


White, T. (2021). Covid-19 impacts on foreign direct investments in sub-Saharan Africa. Available
online
https://www.brookings.edu/articles/covid-19-impacts-on-foreign-direct-
investments-in-sub-saharan-africa/ [Accessed 28-7-2023]
World Bank (1997). Private capital fows to developing countries: the road to fnancial integration.
Oxford University Press, Oxford
World Bank (2003). A user’s guide to pove

DOWNLOAD PDF

---

Back