Financial Globalisation and Domestic Investment in Developing Countries: Evidence from Nigeria

Financial globalisation is hypothetically helpful to a country to the extent that capital inflows augment available domestic savings for investment purposes. This may be impossible where a globalised country finds itself experiencing more capital outflows than inflows. In this study, we identified the factors that determine the level or degree of financial globalisation of a country as the nominal exchange rate, the level of financial development as captured by the level of financial deepening of the financial system and trade. Using the Kaopen (Capital opening index) and average exchange rates measures of financial globalisation the paper found that, for Nigeria, the greater the level of financial globalisation, the more Nigeria experienced capital outflows. Export is particularly positively impactful on capital outflows. Capital outflows have depleted available domestic resources and impacted domestic investment negatively. The paper recommends the greater need for autonomous investment to crowd in other investments by implementing policies that encourage investment in the economy. This situation may not improve until there is a proactive and deliberate action from the government to improve investment, especially of infrastructure,in the econom

Investigating the Effect of Capital Inflow on Domestic Investment in Nigeria: A Vector Error Correction Model (VECM) Approach

The exact role of capital inflows enhancing domestic investment and promoting economic growth has been of great concern to policymakers and researchers taking into account the huge reliance on capital inflow in Nigeria. This study investigates the effect of capital inflow on domestic investment in Nigeria between the periods 1981 to 2016 using Vector Error Correction Model (VECM) approach. The variables used are the various components of capital inflow (foreign borrowing, foreign direct investment, portfolio investment, official development assistance and workers’ remittance) and domestic investment. The study revealed that a rise in the various components of capital inflows (foreign direct investment, portfolio investment, and official development assistance) would enhance domestic investment in the country while a rise in foreign borrowing and workers remittance would lead to decrease in domestic investment. Furthermore, the study revealed that capital inflows (portfolio investment and official development assistance) Granger cause domestic investment in the country. The study recommends that for government to close the savings and foreign exchange gap there is the need for appropriate policies to be design to determine the optimal level of capital inflow that will enhance domestic investment in the country. In addition, the government should provide adequate social amenities, infrastructural facilities, political stability and also conducive environment that is business friendly so as to attract foreign capital into the country for investment purpose. Keywords: Capital Inflow, Economic Growth, Domestic Investment, Nigeria, VECM. JEL CODE: F21, O55, P3

A Co-Integration Analysis of Interest Rate Spread and Corporate Bond Market Development in Selected African Economies

This paper examines the relationship between interest rate spread and corporate bond market development in thirteen African economies comprising of Botswana, Egypt Mauritius Nigeria, Tunisia, Cameroon, Kenya, Morocco, South Africa, Cote d’Ivorie, Ghana Namibia, Tanzania from 2004 and 2014 using fully modified ordinary least square (FMOLS) in an autoregressive distributive lag (ARDL) framework. Subsisting literature suggests that in bank-based economies, interest rate spread could adversely affect the potency of corporate bond market development; and thus limits the financial market competitiveness. The result provides evidence that corporate bond issue, as a proxy for financial development is negatively influenced by interest rate gap in the short and long term. The result affirms the ‘group interest' theorem in these African economies leading to a deterrent in competitive financial development. The ECM coefficient satisfies a priori expectation, affirms the short run dynamic relationship, which implies long run equilibrium from the annual speed of adjustment, which is about 100 percent. The paper suggests policy recommendations for the reduction in interest rate, and thus the spread to encourage the growth of corporate bond issues for a market-led financial development

Financial exclusion of bankable adults: implication on financial inclusive growth among twenty-seven SSA countries

The G20 made a commitment to adopt financial inclusion as a major support towards the achievement of its 2030 Agenda for Sustainable Development of all member countries. Specifically, the sustainable development goals of employment creation, hunger elimination and poverty reduction would be addressed when those in the informal sector are captured into mainstream finance. This study investigated how financial exclusion impairs inclusive drive of 27 sub Saharan African countries using secondary data sourced from World Bank database for 10 years (2007–2017). Granger Error Correction Method (ECM) with General Methods of Moments (GMM) of Arellanon and Bond (1991) were used to analyse the short panel data obtained from the World Bank database. The ECM test result found evidence of a long-run relationship, however, in the short-run, there is an insignificant but positive relationship between financial inclusion and exclusion with values recorded at 0.33, 0.37 and 0.32 for low, moderate and high financial stable countries, respectively. This implies that, there is no correlation between financia

Social integration and financial inclusion of forcibly displaced persons in Sub-Saharan African countries

Most government and international financial institutions worldwide have adopted financial inclusion as a veritable platform for achieving the Social Development Goals of hunger and poverty eradication, inequality reduction, and employment creation. Their efforts will not yield much dividend if a sizeable part of the populace are constrained from social and formal financial inclusion due to social disorder. This study examined the relationship between social seclusion of forcibly displaced persons from formal financial inclusion in twenty-seven Sub-Saharan African countries. Granger Error Correction Method (ECM) with Generalized Methods of Moments (GMM) was used to analyze the short panel data obtained from the World Bank database. The study found a negative long-run relationship between social seclusion and financial inclusion. That is, an increase in social menace overtime will result in more people being financially excluded from formal financial transactions. It, therefore, recommends, amongst others, that government should encourage forcibly displaced persons to become gainfully employed and productive. Specifically, persons in refugee and internally displaced persons camps should be trained to acquire skills that will enable them to become self-employed, create wealth for themselves, and contribute actively to the sustainable economic growth of their host country rather than just provide food and other welfare packages as a temporal palliative for surviva

Dynamics of Digital Finance and Financial Inclusion Nexus in Sub-Saharan Africa

With the revolution in the financial technology space occasioned by competition among financial market intermediaries, there is no doubt that more unbanked and under-banked citizens will be captured into the financial net of the economy. This study examined the dynamic relationship between digital finance and financial inclusion in 27 sub-Saharan African countries. Granger Error Correction Method (ECM) with General Methods of Moments (GMM) of Arellanon and Bond (1991) were used to analyze the short panel data. The study found that a positive long-run relationship exists between digital finance and financial inclusion. It therefore recommends amongst others that monetary authorities of emerging and developing economies in sub-Sahara African countries should embrace digital financial technologies by encouraging commercial banks to install more ATMs and discourage acceptance of cash payment and withdrawals within established thresholds across bank counters in their respective countrie

Financial inclusion; digital finance; financial intermediation; poverty reduction

The G20 made a commitment to adopt financial inclusion as a major support towards the achievement of its 2030 Agenda for Sustainable Development of all member countries. Specifically, the sustainable development goals of employment creation, hunger elimination and poverty reduction would be addressed when those in the informal sector are captured into mainstream finance. This study investigated how financial exclusion impairs inclusive drive of 27 sub Saharan African countries using secondary data sourced from World Bank database for 10 years (2007–2017). Granger Error Correction Method (ECM) with General Methods of Moments (GMM) of Arellanon and Bond (1991) were used to analyse the short panel data obtained from the World Bank database. The ECM test result found evidence of a long-run relationship, however, in the short-run, there is an insignificant but positive relationship between financial inclusion and exclusion with values recorded at 0.33, 0.37 and 0.32 for low, moderate and high financial stable countries, respectively. This implies that, there is no correlation between financial inclusion and financial exclusion (proxy by unemployment) in the three sets of countries sampled. However, for the moderately stable financial system, exclusion has negative long run multiplier impact on inclusion. The study therefore recommends policies that could sustain and improve employment rate in poorly and highly stable financial system