Financial Sector and Economic Development of Nigeria and South Africa

Abstract

The study examines the financial sector and economic development of selected countries of Sub-Saharan Africa: the case of Nigeria and South Africa. The study covered the period of thirty-two years from 1990 to 2022. The specific objectives were to examine the effect of capital market capitalization on the economic development of Nigeria and South Africa, to examine the effect of the total value of equity traded on the economic development of Nigeria and South Africa, to ascertain the effect of bank deposit liabilities on the economic development of Nigeria and South Africa and to find out the effect of money supply on economic development of Nigeria and South Africa. The study adopted ex-post facto research design. The data is sourced from Central Bank of Nigeria Statistical Bulletin, World data, harts.com and Absa Group Limited in South Africa. Adopting the Auto-Regressive Distributed Lag(ARDL) modeling technique, the study revealed among others that whereas a significant short run relationship exists between financial sector (MCAP, TVET, BDL, MS) and all the selected economic development indicators (PI, HDI, GC, GDPC) in Nigeria, there is a significant short run relationship between financial sector (MCAP, TVET, BDL, MS) and only two of the selected economic development indicators (HDI, GDPC) in South Africa. Similarly, whereas a significant long run relationship exists between financial sector (MCAP, TVET, BDL, MS) and all the selected economic development indicators (PI, HDI, GC, GDPC) in Nigeria, there is a significant long run relationship between financial sector (MCAP, TVET, BDL, MS) and only two of the selected economic development indicators (GC, GDPC) in South Africa. On the basis of these findings, the study concluded that though Nigeria outperformed South Africa under most of the indicators of economic development; most worrisome was the poor contribution of financial sector to

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