Capital Market and Economic Development: A Comparative Study of Three Sub-Saharan African Emerging Economies

The study is undertaken with the objective of examining the relationship between capital market and economic development in emerging African economies. The study adopted an ex-post facto research design for Nigeria, South Africa and Kenya and the variables used were Human Development Index (HDI) as the dependent variable, Stock Market Capitalization (SMC); Value of Stock Traded (VST); Stock Market Turnover Ratio (TR) as independent variable. Moreover, the period under study was from 1990 to 2018 and the data collected within the period were analysed using descriptive statistics, ARDL regression, granger causality and Ordinary Least Square (OLS) for the comparative single country regression analysis. The study empirically proves that capital market has a significant relationship with economic development in the selected emerging Africa economies in Nigeria and South Africa except for Kenya which conforms with the Finance Led Growth Hypothesis Theory. We recommend that Governments of Sub-Saharan African economies should formulate and implement policies that will ensure relative stability in the market-based stock market of the economy to foster capital formation, increase investment and ensure stability in the financial system.

American Journal of Industrial and Business Management 2017. Also, capital market performance dived further from a 20.45% in 2007 to 8.20% turnover ratio in 2018. This was not the same for South Africa, for there was a boom in capital market performance in 2007 but an immediate sharp decline in 2008 $482 billion and a recovery at $925 billion in 2010. During these periods, HDI went on an increase from 62% in 2007 to 63% in 2008, and the increase continued to 70% in 2017. During the increase in HDI, it didn't reflect in inflation in that same period, inflation stood at 6.2% in 2007 but later declined in 2010 at 4.10%. The Kenyan economy grew consistently from 1990 to 2017, HDI was seen growing steadily from 47% in 2007 to 59% in 2017. But the case was different for that of capital market performance, turnover ratio declined from 11.99% in 2006 to 1.81% in 2009 and later increased to 10.02% in 2015 (World Bank, 2019). This shows that South Africa has been more efficient in the African stock exchange compared to the other two stock exchanges under study.
Looking at the Human Development Index in Africa, no African economies are among the first fifty (50) economies in terms of development. While Norway is the highest in ranking in the world, South Africa is ranked 112 th followed by Kenya ranked 141 st and Nigeria ranked 156 th in the world with HDI of 70%, 59% and 53% respectively as at 2017. This showed that regardless of the economic growth in GDP of the various countries that showed South Africa ranked before Nigeria then Kenya, there are varying positions between economic growth and economic development of economies. Thus, regardless of their ranking, the question that how has capital market affected the economic development of the emerging sub-Saharan African economies in Nigeria, Kenya and South Africa. Finally, another motive for development of a capital market is that the emerging market economies are expected to play a bigger role in driving development. Following this, efforts have been done in other to create an enabling environment for the successful and efficient operation of the stock exchange through a sound regulatory body, capacity building, and safe and robust securities markets in those countries. Thus, the engineered soundness of a robust capital market is anticipated to improve the economic development of sub-Sahara African emerging economies. Hence, the purpose of this study is to investigate the relationship between capital market and economic development of Sub-Saharan African emerging economies.

Review of Related Literature
Capital market is the market for the mobilization and utilization of long-term funds for development (Anyanwu, 1993;Jhingan, 2005). Capital market supplies industry with fixed and working capital and finance medium-term and long-term borrowings of the central, state and local governments (Rose & Marquis, 2009;Mishkin, 2007;Nwaolisa, Kasie, & Egbunike, 2013). Thus, the capital market is a highly specialized, organized and indeed essential agent of economic development because of its ability to facilitate and mobilize saving and investment via the financial market.
In the Sub-Saharan African economies for instance, stock exchange like the Nigerian stock exchange, the Johannesburg stock exchange and the Kenyan stock exchange have played key roles in resource mobilization to economic development African. These different stock exchanges have a connecting tool that allow trade across co-countries and none co-countries to boost availability of funds or transactions in the market thereby enhancing the movement and flow of funds from the saving surplus economy to the saving deficit economy of the world to boost economic development of Africa.
Theoretical Review However, the activities of the capital market are influenced by diverse theories that militate for and mitigate flows of funds. Thus, the different theories like the Neoclassical theories, Harrod and Domar Growth model and the Finance Led Growth hypothesis all made their postulation on the possible advantages of capital market on economic position. However, the Finance Led Growth hypothesis is discussed. The positive view of finance-led growth focuses on the role played by finance in mobilizing domestic savings and investments through a more open and liberalized financial system and promoting productivity through creation of efficient capital markets. Schumpeter (1912) is believed to have laid the foundation for the finance led growth hypothesis. He contends that a well-functioning financial system will spur technological innovations through efficiency of resource allocation from unproductive sector to productive sector. Goldsmith (1969) builds on the finance-led growth hypothesis. He contends that evolution of domestic financial markets may enhance and lead to high level of capital accumulation. Furthermore, Levine (1996), argue that stock market liquidity; the ability to trade equity easily is important for growth/development.
This proposition is one that we wish to prove or rebut in this study, to know whether changes in capital market actually leads to proportionate changes in economic growth or otherwise. Following the background of this theory, it is adopted as the theoretical framework for this study.
Empirical review Capital markets act as a connection tool between monetary and real sector and therefore smoothen the process of growth in the real sector and economic development. The nexus between capital market and economic growth has been empirically investigated by researchers in Nigeria, South Africa, Kenya and other emerging and developed countries of the world. However, this study is centered on capital market and economic development thus the following empirical review; Osakwe, Ogbonna, and Obi-Nwosu (2020) examined stock market capitalization on economic growth in Nigeria and South Africa for the period 2000-2018. The study discovered that the relationship between market capitalization ratio to GDP and economic growth is positive for South Africa but insignificant for Nigeria. Thus, the economic growth is positively correlated with the size of both countries' capital markets, though the size of South Africa capital market has better contribution to economic growth compared to Nigeria. Nwamuo (2018) studied impact of capital market on the economic growth in Nigeria from 1981 to 2016 and discovered that market capitalization and number of deals have a positive impact on the economic growth in Nigeria while total listed F. U. Adoms et al. equity and volume of transaction have a negative impact on the economic growth in Nigeria in the short run. Osakwe and Ananwude (2017), looked at the short-run and long-run relationship between stock market development and economic growth in two emerging economies in Africa namely Nigeria and South Africa discovered that in both short and long run, there was a positive but insignificant relationship between stock market development and economic growth in Nigeria and South Africa. Further results revealed that economic growth significantly affects market capitalization of South Africa, while having insignificant effect on market capitalization in Nigeria. This South Africa result was confirmed by the study of Cuthbert (2017), who examined the long-run causal relationship between stock market development and economic growth in South Africa. He concluded that stock market development Granger-causes economic growth and vice versa. Okoro (2016) looking at a comparative analysis on stock market performance and augmentation of frontier economies: Nigeria and Mauritius during 2006-2010.
The findings revealed that stock market performance for Mauritius was superior to Nigeria and same for GDP. Okoye, Modebe, Taiwo, and Okorie (2016) investigated the relationship between capital market development and economic growth over the period 1981-2014 in Nigeria. Using VECM, MC-Ratio and T-ratio have significant negative effect and positive effect of VT-ratio were revealed as well as negatively insignificant effect of inflation rate on aggregate national output (GDP). Their long-run estimate showed that all the regressors have significantly negative impact on GDP. Their result further showed that MC-ratio, VT-ratio and T-ratio granger cause changes in the aggregate national output, thus revealing a unidirectional causality from GDP to inflation. Taiwo, Adedayo, and Evawere (2016) evaluating the contribution of capital market to the growth of Nigeria's economy also established the same findings as Okoye, Modebe, Taiwo, and Okorie (2016). Bilal, Chen, and Komal (2016) studied the effect of stock market development on economic growth using panel data techniques by fixed effects and random effects for 20 Lower-Middle Income countries from 1990 to 2012 and discovered that there is positive and significant effect of stock market development on economic growth. The study of Ruwaydah and Ushad (2015)

Methodology
The study used ex-post facto research design and data were derived from World Bank Data base. The study covers the period of 28 years from 1991 to 2018. The study adopts Osakwe and Ananwude (2017). Their model is stated thus: (Osakwe & Ananwude, 2017) where, GDPGRt-Gross Domestic Product, MKTCRt-Market Capitalization

Ratio to Gross Domestic Product and SVTRt-Stock Value Traded Ratio to
Gross Domestic Product.
The OLS regression models take the form Restatement in a multiple regression form is stated thus: The log-linear function takes the form.

Presentation and Analysis of Results
This section is divided into three subsections. The unit root test is presented first, followed by cointegration tests. This leads to the presentation of the Panel

Co-integration and Granger analysis for the countries. American Journal of Industrial and Business Management
The stationarity outcome in Table 1 reports that the tests for stationarity properties of the series following the Augmented Dickey Fuller (ADF) statistics were found to be stationery at level and order one (1). At the First difference as reported, the ADF Statistics for the respective variables were all negative than the critical values at 5% significance level. The reported P-values were all less than 0.05 chosen level of significance for which cause, the Null Hypothesis of the presence of unit root in all the variables is convincingly rejected.
The unit root outcome in Table 2 showed that all the variables following the Augmented Dickey Fuller (ADF) statistics were stationery at level and order one (1). At both level and first difference as reported, the ADF Statistics for the respective variables were all negative than the critical values at 5% significance level. The reported P-values were less than 0.05 chosen level of significance for which cause, the Null Hypothesis of the presence of unit root in all the variables is convincingly rejected.
The result of Table 3 reports the tests stationarity properties of all the variables following the Augmented Dickey Fuller (ADF) statistics which were stationery at order one (1). At the first difference as reported, the ADF Statistics for  For the purposes of Co-integration analysis and tests, ARDL Bound and Long-term Co-integration analysis will be conducted and it is also interesting to state that the variables are all integrated of the mixed order for two countries Nigeria and Kenya except South Africa.

Tests for Co-integration
Co-integration is used in Finance to model long-run equilibrium relationship (Brooks, 2014). Co-integration methods have been used in several established researches to test for long-run equilibrium relationship (Levine &Zervos, 1998 andSoumaré &Tchana, 2015). These form the basis for our adoption of co-integration method to test for the existence of long-run equilibrium relationship before we can proceed with our regression analysis.

Individual Country Co-integration Test
The results of the ARDL bounds testing approach as shown in Table 4 indicates that the F-statistic with a coefficient of 1.420853 is less than the lower bound value 3.1 and upper bound value of 3.63 at 5% level of confidence. Thus, no level of long-run relationship was established in the study. This is evident in the case 2 of Table 2. The insignificant t-bound distributional relationship at 0.653827 significance level which is less than the confidence/significance of the study. Therefore, the empirical findings provide that there is no long-run relationship between capital market and economic development of Nigeria.
The results of the ARDL bounds testing approach as shown in Table 5 indicates that the F-statistic with a coefficient of 3.358341 is more than the lower bound value 3.1 and less than the upper bound value of 3.63 at 5% level of confidence. Thus, strong level of long-run relationship was established in the study.
However, the insignificant t-bound distributional relationship at −0.801293 significance level which is less than the confidence/significance of the study.
Therefore, the empirical findings provide that there is a long-run relationship between capital market and economic development of Kenya.
The results of the ARDL bounds testing approach as shown in Table 6 indicates that the F-statistic with a coefficient of 3.916985 is more than the lower bound value 3.1 and the upper bound value of 3.63 at 5% level of confidence.
Thus, strong level of long-run relationship was established in the study. However, the insignificant t-bound distributional relationship at −0.202154 significance level which is less than the confidence/significance of the study. Therefore, the empirical findings provide that there is a long-run relationship between capital market and economic development of South Africa.
From Table 7, the result established that the capital market variables in Nigeria showed that there is no presence of a long-run relationship in the study.
While in Kenya and South Africa, the capital market variables prove that there was long-run relationship with economic development with F-statistics of 3.358341 and 3.916985 which is above the lower bound at 5% level of significance respectively.   (HDI) and this impact is statistically significant at 5% level since its p-value is well above 0.05. Therefore, we reject the null hypothesis, thus accepting the alternative hypothesis. This shows that the past level of SMC in Nigeria positively and significantly impacts economic development (HDI).
In Table 9, the R 2 and Adjusted R 2 both showed 98.66% and 98.49% respectively. This shows that the chosen regression model best fits the data. Hence, the goodness of fit regression model is 98.66% and implies that chosen explanatory  Hence, from Table 9, the Kenya SMC, has a t-statistic value of −0.587042 and a P-value of 0.5627, was found to have a negative and insignificant relationship and does not impact on economic development and this impact is statistically insignificant at 5% level since its P-value is well above 0.05. Therefore, we accept the null hypothesis. This shows that the past level of stock market capitalization (SMC) in Kenya negatively and insignificantly impact economic development (HDI). In Table 10, the R 2 and Adjusted R 2 both showed 56.01% and 47.63% respectively. This shows that the chosen regression model moderately fits the data. Hence, the goodness of fit regression model is 56.01% and implies that the chosen explanatory variables explain variations in the dependent variables to the tune of 56.01%. Also, with a moderate Adjusted R 2 (47.63%) implies that the model can take on more variables without the R 2 falling beyond 47.63%. At the intercept (constant) of the regression model the dependent variable Y has a value of 65.79731, when SMC, TR and VST (South Africa) are equal to zero (0). However, if SMC, TR and VST are increased by 1% the dependent variable Y will decrease by −6.3512, −0.164812 while increase by 4.2111 for SMC, TR and VST respectively. F-statistic of 6.685552 is considered very good being positive and significant enough and it shows that there is overall significant positive relationship between the dependent and explanatory variables. The overall probability (F-statistic) of 0.001237 is rightly signed and very significant and displays a Durbin-Watson of approximately 0.584, which shows presence of autocorrelation on the chosen data. This therefore facilitated the needs for confirmatory test via heteroscedasticity test and Breusch-Godfrey test. From Table 11, the p-value is less than the chosen level of significance of 5%, confirming the presence of autocorrelation in the model. This is further enhanced with a Durbin-Watson statistic of 1.533092. Hence, we do not suspect any violation of the assumptions of classical linear regression.
The null hypothesis states that there is No heteroskedasticity if P-value is not significant and is greater than the chosen level of significance of 5%. Hence, in this case, we accept the Null hypothesis that there is no evidence of heteroskedasticity since P-value is greater than 5% significance level in    P-value of 0.0029, was found to have a negative and statistically significant relationship with economic development at 5% level since its P-value is well below 0.05. Therefore, we reject the null hypothesis to accept the alternative. The implication of this result is that VTS has a depressive effect on economic development in Nigeria and that a 1% increase in future VTS will result to a −3.726222% American Journal of Industrial and Business Management falls in economic development (HDI) in Nigeria.
From Table 15, the Kenyan VTS, has a t-statistic value of 2.474808 and a P-value of 0.0208, was found to have a positive and statistically significant relationship with economic development at 5% level since its P-value is well below 0.05. Therefore, we reject the null hypothesis to accept the alternative of significant relationship between Value of Stocks Traded had significant relationship with Human Development Index (HDI). The implication of this result is that VTS has an increasing effect on economic development in Kenya and that a 1% increase in future VTS will result to an increase to the tune of 7.8210% in economic development (HDI) in Kenya. From

F. U. Adoms et al.
Based on the findings and conclusion for Nigeria, Kenya and South Africa, the study therefore rejects the null hypothesis for Nigeria, Kenya and South Africa stating clearly that VTS have significant relationship with HDI within the period under review. However, the Nigerian relationship between VTS and HDI was negatively significant while the other countries in Kenya and South Africa are positively significant (Table 17).
H o3 : Stock Market Turnover had no significant relationship with Human Development Index (HDI) of selected Sub-Saharan African emerging economies.
H o3 : Stock Market Turnover had significant relationship with Human Development Index (HDI) of selected Sub-Saharan African emerging economies.
From Table 18, the Nigeria TR, has a t-statistic value of 1.846626 and a P-value of 0.0846, was found to have a positive and statistically insignificant relationship with economic development at 5% level since its P-value is well above 0.05. Therefore, we accept the null hypothesis that Stock Market Turnover had no significant relationship with Human Development Index (HDI) in Nigeria to reject the alternative. The implication of this result is that a 1% increase in TR will result to a 0.181285% rise in economic development, showing an increasing insignificant effect of TR on economic development in Nigeria.   Table 19, the Kenya TR, has a t-statistic value of 0.042468 and a p-value of 0.9665, was found to have a positive and statistically insignificant relationship with economic development at 5% level since its p-value is well above 0.05.
Therefore, we accept the null hypothesis that Stock Market Turnover had no significant relationship with Human Development Index (HDI) in Kenya to reject the alternative. The implication of this result is that a 1% increase in TR will result to a 0.002375% rise in economic development, showing an increasing insignificant effect of TR on economic development in Kenya.
From Table 20, the South African TR, has a t-statistic value of −2.072392 and a p-value of 0.0507, was found to have a negative and statistically significant relationship with economic development at 5% level since its p-value is well below 0.05. Therefore, we reject the null hypothesis to accept the alternative of significant relationship between Stock Market Turnover had significant relationship with Human Development Index (HDI) in South Africa. The implication of this result is that TR has an increasing effect on economic development in South Africa and that a 1% increase in future TR will result to a decrease in the tune of −0.164812% in economic development (HDI) in South Africa.

Hypothesis Three Decision
Based on the findings and conclusion for Nigeria, Kenya and South Africa as summarized in Table 21, the study therefore rejects the null hypothesis for South

Discussion of Findings
Objective showed that stock market capitalization improves the Nigerian economic growth by 370.94% by every significant improvement in the stock market capitalization.
The result of this study for Nigeria is corroborated by the study of Okoro (2016) but contradicted by Osakwe and Ananwude (2017) while the findings of Osakwe and Ananwude (2017) and Ruwaydah and Ushad (2015); and Aduda, Masila, and Onsongo (2012) supported the position of findings in South Africa and Kenya respectively but contradicted by Cuthbert (2017) Ake and Ognaligui (2010) in Cameroun but the results were also contradicted by previous findings in Yadirichukwu and Chigbu (2014) and Onwe (2015) in Nigeria and Nordin and Nordin (2016) in Malaysia. While in South Africa, the result is corroborated by the study of Ruwaydah and Ushad (2015) and contradicted by findings in Yartey and Adjasi (2007). The results however showed that the position of findings is contradictory to previous findings in the literature for the three selected developing African economies.
A probable direct interpretation of this result is that the efforts of stock market turnover were basically high and significantly improve economic development in South Africa and while the result showed improving but not significant improvement in the economic development of Nigeria and Kenya; these showed that stock market turnover is however unable to significantly improve human development index (HDI)/economic development in the two countries of Nigeria and Kenya while South Africa showed significant improvement of economic development of South Africa.

Conclusion
This research studied the nexus between capital market and economic development in selected emerging African economies following largely from the theoretical postulation of the Finance Led Growth Hypothesis theory. The theory holds that a well-functioning financial system will spur technological innovations through efficiency of resource allocation from unproductive sector to productive sector which will boost economic development, which constituted the focus of this work. Arguments in favour of the capital market and economic development and contradictions to the postulations were reviewed from empirical literature. Empirical analysis unbundled stock market performance index into Market capitalization, market turnover ratio, number of listed shares, value of stock traded and all share index in measuring the effect and this study however anchor its capital market performance on market capitalization, value of stock traded and stock market turnover ratio.
The need to domesticate the study of this relationship to our selected emerging African economies, contribute to current literature on subject, validate other scholars view point and use a more dynamic and robust analytical tool that captured the time series nature of the data involved motivated this study.
It was against the foregoing that the study chose a broad objective of examining capital market and economic development proxy by human development index (HDI) with evidence from selected emerging African economies focusing on three major economies namely-Nigeria, South Africa and Kenya.
The results emanating from our study proved that capital market has significant relationship with economic development of Nigeria and South Africa with only Kenya showing insignificant relationship between stock market performance and economic development. In conclusion, based on the outcome of our study, we affirm that capital market performance has a significant relationship with economic development in Nigeria and South Africa but showed insignificant effect of stock market performance on economic development in the selected emerging African economies in both short-run and long-run equilibrium periods.

Recommendations
Seeing that the results and conclusion of this work conforms with the Finance Led Growth Hypothesis Theory in the relationship study for Nigeria and South Africa, it is pertinent to further develop the capital markets performance of the emerging Sub-Saharan African economies in other to foster economic development. In line with this, government of Sub-Saharan African economies should improve basic infrastructures such as communication and information network and ensure the activities of stock market are human development oriented. This will enhance transactions between parties of the market (issuing house, stock brokers, investors etc.) and improve economic development; efforts should also be made to encourage a large market which will improve volume of stock traded which widens the prospect for economic development; and there should be formulation and implementation of incremental policies that will ensure improvement relative stock market turnover and its stability in the market-based stock market of the economy to foster human capital formation, increased investment, F. U. Adoms et al. ensure stability in the financial system and human development at large.
Further study should endeavour to address a regional and panel data enshrined study on capital market and economic development of African economies on the aftermath of COVID 19 (Monthly data can be best for such study as the COVID 19 period is still fresh and on-going).