ABSTRACT
This study investigated the nexus between financial openness and capital market development in sub-Saharan African (SSA) countries from 1990 to 2022. Specifically, the study examined the extent to which capital account openness, foreign direct investment, foreign portfolio investment, foreign remittance flows and banking sector development influence capital market development in sub-Saharan African countries.
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 analysed using Panel data analysis (the fixed effect and random effect models) techniques. The statistical software employed in conducting the statistical estimation is the EView 10 software.
The findings revealed that capital account openness, foreign portfolio investment, foreign remittance and domestic credit to private sector all have significant effect on the development of capital market in SSA countries. The study concluded that removing restrictions and limitations to open capital account and financial system either through qualitative or rule-based policy or by actual (realized) international capital mobility has the capacity to rapidly drive the growth and development of the capital market in SSA countries. The study therefore recommended among others thatOpen 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 to avoid any repercussive effect. Also, greater focus on encouraging foreign portfolio investment should be maintained to spur the rapid development of SSA capital market.
