ABSTRACT
Improvements in the financial sector has been a major contributor to increased economic growth, drawing from theories of economic growth. This study is carried out to test the hypothesis with respect to financial institutions and markets in the two biggest economies of Sub – Saharan Africa. Economic growth and expansion for both countries is measured by Real Gross Domestic Product Per Capita Growth Rate, as the explained variable while the explanatory variables are Broad money to GDP ratio, Commercial banks branches per 100,000 adults, Lending – Deposit rates spread, Bank capital – asset ratio and Stock price volatility. Data is obtained from the World Bank for both Nigeria and South Africa. Two models are established, one for each country. For analysis, the Augmented Dickey – Fuller unit root test, and Autoregressive Distributive lag model are used. The results show that Broad money to GDP ratio and Commercial banks branches per 100,000 adults had a significant effect on Real GDP per capital growth rate in Nigeria while Broad money to GDP ratio had a negative influence, Commercial banks branches per 100,000 adults had a positive influence both in the short and long run. The results also show that no explanatory variables had a significant influence on Real GDP per capita growth rate in South Africa. The study inferred that financial sector development in both Nigeria and South Africa is yet to grow sufficiently to make the desired impact on Real GDP per capita growth rate. It was recommended that creation of more banks in the rural areas so that more people will have access to financial institutions, sound monetary policies by financial and economic expert just to mention but a few, will have a desired effect or influence on the economy.
KEYWORDS
Financial Development, Real GDP per capita growth rate, Broad money to GDP ratio, Commercial banks branches per 100,000 adults, Lending – Deposit rates spread, bank capital – asset ratio and Stock price volatility.
