This paper is an attempt to examine the impact of financial development on the economic growth of sub Saharan Africa. Three representative countries namely Nigeria, Ghana and South Africa were chosen. Three models were constructed for each country. The GDP proxied economic growth while four regressors were developed as proxies for financial development. Data was generated from the World Bank, IMF and Central Banks of the sample countries for the period 1980-2012. The Augmented Dicker Fuller test was employed to test for stationarity of the data and the Ordinary Least Squuare (OLS) procedure, Cointegration and Causality tests were adopted to test the hypothesis that there is no signficant relationship between financial development and the economies of the sample countries selected for the study. The results of the study confirmed that a significant positive relationship exists between financial development and economic growth of the three Sub-Saharan countries under study. Remarkably, the proxies of Financial development exerted significant effect on the economic growth of South Africa but significantly weak in Ghana and Nigeria. Curiously, Bank Credit to the public and private sectors of the three economies had the wrong signs highliting the high risks associated with lending in the developing economies which also agrees with the poor performance of these countries in the World Economic Forum’s Financial Development Index (FDI) Fifth Pillar –Access. Indeed, the poor performance of this variable counteracts the belief that the presence of financial services as reflected by it’s size and depth does guarantee accessibility by different types of users within an economy. Some of the lessons learnt so far from the global meltdown include the fact that without an efficient financial system and market, no economy can function. Consequently, economies of the sub-saharan African countries in order to grow, must concentrate on reforms and policy reviews, interest rate management and improvement of financial services and markets with a view to removing all barriers towards access to financial services and markets within the economy.
Keywords:
Financial development index, Access, economic growth, Growth trajectory, Risk diversification.
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