Financial Integration and Economic Development:

A Comparative Evidence from two Sub-Saharan African Countries – Nigeria and South Africa (1986 – 2023)

Abstract

The effect of financial integration on economic development of Nigeria and South Africa was examined in this study. There has been a lot of scholarly research done on the connection between financial integration and economic development, especially in emerging nations where financial openness is considered as a means of attracting foreign capital and promoting growth. Nigeria and South Africa, two of the largest economies in Africa, present an intriguing case for comparative analysis. In specific term, the effect of money supply to real gross domestic product, private sector credit to real gross domestic product, and foreign direct investment to real gross domestic product on human development index in Nigeria and South Africa were ascertained. The study employed an ex post facto research design using secondary data sourced from World Bank Development Indicators from 1986 to 2023. The Auto- Regressive Distributive Lag (ARDL) technique was utilized in analyzing the data. The result that emanated from the study showed that money supply to real gross domestic product, private sector credit to real gross domestic product, and foreign direct investment to real gross domestic product have no significant effect on human development in Nigeria and South Africa. With regard to the nature of relationship in the short-run, there is an insignificant positive relationship between money supply to real gross domestic product and human development index in Nigeria and South Africa; the relationship between private sector credit to real gross domestic product and human development index is negative and insignificant in Nigeria but insignificant and positive in South Africa; and foreign direct investment to real gross domestic product is insignificantly and negatively related with human development index in Nigeria and South Africa. The study recommends that monetary authorities of Nigeria and South Africa through the Central Banks are advised to reduce interest rates and ease access to credit as they are the two ways that can increase money supply which spur economic development. Governments should establish favorable conditions for the expansion of the private sector, such as improved infrastructure, dependable regulations, and easier access to capital for small and medium-sized businesses