Stock Market Development in Sub-Saharan Africa: Critical Issues and Challenges

This paper examines the impact of stock market development on economic growth in Sub‑Saharan Africa using a balanced panel data of five selected countries over the period 1993 – 2013 and the system generalised method of moments dynamic panel estimation framework. The paper finds a positive impact of stock market development proxied by the turnover ratio of domestic shares and market capitalization on economic growth though minimal. Furthermore, investment, lagged gross domestic product and human capital were found to have a significantly positive impact on growth while trade and foreign direct investment negatively impacted on growth, even though the results for foreign direct investment is not significant in all the models and consequently, not very robust. There should be policy measures aimed at enhancing economic growth using the development of the stocks market as a channel. Such policies should focus on developing the appropriate mix of taxation of investors as well as the development of requisite technology, institutional and regulatory framework that will facilitate an increase in the size and liquidity of the market in the sub‑region.

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Impact of Oil Prices on Stock Market Development in Selected Oil Exporting Sub-Saharan African Countries

e-Finanse ◽

10.2478/fiqf-2020-0008 ◽

2020 ◽

Vol 16 (2) ◽

pp. 1-13

Author(s):

Adewale T. Muritala ◽

Adeniyi M. Ijaiya ◽

Ahmed O. Adekunle ◽

Ibraheem K. Nageri ◽

A. Bolaji Yinus

Keyword(s):

Stock Market ◽

Exchange Rates ◽

Oil Prices ◽

Market Development ◽

African Countries ◽

Stock Market Development ◽

Dynamic Panel Model ◽

Panel Model ◽

Corruption Index ◽

Sub Saharan

Abstract This study examines the dynamic impacts of oil prices on stock market development in four oil exporting sub-Saharan African countries in the period of 1989-2015. The Arbitrage Pricing Theory (APT) is used as the theoretical framework where stock market prices are hypothesized to be fully reflective of all available information. Static panel data (Pooled OLS, panel Fixed Effect Model, panel Random Effect Model) and dynamic panel model of Generalized Method of Moments (GMM) were employed in the estimation. The estimation of the static panel model shows that oil prices, exchange rates, gross domestic product, inflation and the corruption index have a positive and significant impact on stock market development. However, there is a slight improvement from the estimation of the GMM dynamic panel model which confirmed that oil prices, exchange rates, gross domestic product, investment, inflation and the corruption index have a positive and significant impact on stock market development. The study therefore recommends that investors in selected the Sub-Sahara Africa (SSA) stock market need to be cognizant of the varying impacts of macroeconomic indicators, particularly those that have been found to exert strong influence on stock returns like oil prices, exchange rates, inflation and the corruption index.

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