FINANCIAL OPENNESS AND CAPITAL MARKET DEVELOPMENT IN SUB-SAHARAN AFRICAN COUNTRIES

Abstract

This study investigates the nexus between financial openness and capital market development in sub-Saharan African (SSA) countries from 1990 to 2022. Secondary data collected from the World Development Indicator and Chinn-Ito index for the sampled sub-Saharan African countries were employed in the analysis. To present a robust outcome in the relationships, the data were analyzed using Panel data analysis (the fixed effect and random effect models) techniques. The findings revealed that the capital account openness, foreign portfolio investment, foreign remittance and domestic credit to private sector (proxy for banking sector development) all have significant effect on the development of capital market in SSA countries. The study recommended among others that Open capital account should be maintained by SSA countries, through the removal of restrictions that might hinder the free flow of international financial resources and capital, though caution should however be exercised.