Capital Market Development in Africa

Abstract: This paper addresses the impact of capital market development on economic growth and development since the liberalization policy in 1986 to 2010 in Nigeria. It employs Ordinary Least Square (OLS) and Johansen CO-integration estimation techniques. Gross Domestic Product (GDP) was used as measure for economic growth while the capital market development are represented with Market Capitalization (MCAP), Total Value of Transaction (TVT), Total New Issues (TNI), All-Share Index (ALSI) and Total Listing on the NSE (TLT). The result of the study shows that capital market development has not impacted positively on Nigeria economic growth and development due to the relative small size of the market despite its development as a result of the liberalization policy. Thus, it recommends that policies that would encourage domestic as well as foreign investors to participate in the market should be formulated.
Keywords: Capital Market Development, Economic Growth, Structural Adjustment Programme (SAP), Nigeria, Ordinary Least Square (OLS) Method, Johansen Co-integration test

The significance of well-developed capital market in order to foster economic growth is highly imperative to developing countries, Nigeria inclusive. More so, capital market provides long-term financing that is designed to encourage economic growth. In view of the foregoing, this study examines the impact of capital market development on economic growth in Nigeria using annual data covering the period of 1981 to 2019. The analysis involves evaluating the stochastic characteristics of each variable under consideration by testing their stationary property and further estimates the model using ordinary least square technique, Johansen cointegration test and Granger causality test. Findings reveal the existence of a positive and long-run relationship between capital market development and economic growth in Nigeria. Further result from ganger causality test indicates the presence of a unidirectional causality running from capital market to economic growth for the period under consideration. In lieu of that, there is need to make provision for modern facilities in the capital market targeted towards encouraging foreign investors by maintaining state of the art technological services. More so, there is need for Nigeria to develop a capital market that is effective and efficient, by expanding access to credit and financial services, encourage long-term savings mobilisation and long-term capital for investment.

The global economic reports suggest that Africa is the final frontier of the world and as the GDP of Ethiopia
continues to rise substantially year after year, it’s the right time that Ethiopia indulge into channelized marketing for textile
and garment industry. Moreover there is a sequential increase in production and export of organic cotton to the
U.S.A & Europe. It is realized that in the coming decade garment and textile industry is taking a serious turn towards
ecological produce and marketing of products. Ethiopia being one of the fastest developing economies in Africa holds a
great chance to develop the fashion industry on the whole as with the increasing GDP of the country the customer will have
a bigger pocket to spend on fashion & lifestyle products. Moreover there is a substantial rise in the education if textile and garment sector as well. All these factors together will contribute to the growth of the Ethiopian market if the industries channelize their product sales through effective marketing mix.

The objective of the study was to assess & examine Essential requisites for establishing an institutionalized secondary market in Ethiopia using lessons from other developing countries. The research used a mixed approach with descriptive research design and the study used both primary and secondary data as Cross-section by nature using purposive and simple random sampling techniques to select the sample. The number of respondents was 32 from banks, 34 from insurers, 6 from pension institutions, 8 from ECX, 6 from Ethiopia and Addis Ababa Chamber of Commerce & Sectorial Associations and 81 from Share Company’s a total of 167 samples used to form the target population. In addition to this secondary data was used from relevant sources. SPSS used to analyze data and findings were presented by using tables accompanied by a brief explanation. Besides, the qualitative data were analyzed through narrative explanation. The result revealed that there is promising demand, i.e., availability of a company to enlist in the supply side was visible. The findings also indicated that it is essential to have a standard Corporate Governance system in place, strong regulatory body, capacitated judiciary system, uniform accounting, and audit system & standards, trading, and clearing and settlement infrastructure, brokerage firms and investment bank, increased awareness of investors, trained and skilled manpower. Besides, a commitment of the government to support the market, stable macro economy are found to be essential requisite for establishing institutionalized secondary market in Ethiopia. As to their presence currently, there is promising demand and infrastructure, as far as the government commitment and promises are concerned, they are being put in place. Hence, starting and refining it through time is what the author has as a recommendation- Placing regulatory body and start and control the basic tasks, starting awareness creation programs for financial sectors related to their role in the market, updating the proclamation of pension funds, and improve their capacity, train the judiciary system, develop central deposit system, establishing investment bank and develop the market sequentially.
Keywords: secondary market, legal and regulatory infrastructure, and market infrastructure

This paper addresses the impact of capital market development on economic growth and development since the liberalization policy in 1986 to 2010 in Nigeria. It employs Ordinary Least Square (OLS) and Johansen CO-integration estimation techniques. Gross Domestic Product (GDP) was used as measure for economic growth while the capital market development are represented with Market Capitalization (MCAP), Total Value of Transaction (TVT), Total New Issues (TNI), All-Share Index (ALSI) and Total Listing on the NSE (TLT). The result of the study shows that capital market development has not impacted positively on Nigeria economic growth and development due to the relative small size of the market despite its development as a result of the liberalization policy. Thus, it recommends that policies that would encourage domestic as well as foreign investors to participate in the market should be formulated.

This article examines the effect of minority investor protection on capital market development in seven selected African countries. It has been noted that minority investor protection influence capital market development. When the two are analysed using an econometric model, a positive correlation of 0.866157 is obtained. Multiple regression analysis was used to measure this phenomenon with secondary data extracted from World Bank`s databases for the period 2008-2015. The analysis shows that the effect of minority investor protection on capital market development is significant. This article is of great significance to policy-makers, researchers, investors and the academia.