Capital Market Development and Financial Openness in Sub-Saharan Africa

Abstract: The inability of capital markets in Sub-Saharan Africa in fund mobilization has affected financial openness in the sub-continent. It has been vigorously argued that financial openness can still thrive without viable capital market but the intermediation function of capital market should not be overlooked. To this end, this study examined the nexus between capital market and financial openness in Sub-Saharan African Countries for 30 years period ranging from 1990 - 2019.The study proxied financial openness with capital account balance ratio, private capital inflow ratio, number of listed companies, external finance through foreign capital market and per capita income ratio while capital market development was measured with market capitalization ratio. The study employed secondary data collected from World Development Indicators, Securities and Exchange Commission statistical bulletin, and Stock Exchange fact books of the respective countries. The study adopted ex-post facto research design while the time series data were analyzed using descriptive statistics, correlation, unit root test, granger causality test, Johansen co-integration and error correction model via E-Views 10. The result revealed that there is no significant relationship between market capitalization ratio and capital account balance ratio in Nigeria; a significant negative relationship between capital account balance ratio and market capitalization ratio in Zimbabwe; a significant positive relationship between private capital inflow ratio and market capitalization ratio in South Africa and a significant positive relationship between private capital inflow ratio and market capitalization ratio in Nigeria. The study recommended that Sub-Saharan Countries should develop trade openness and liberalisation policy that would promote the international relationships necessary for increasing market opportunities and enhancing profitable investments. Therefore the country should continue to develop its capital market to achieve international standards and attract more investors