DEBT AND FINANCIAL DEVELOPMENT IN AFRICA
In this study, an analysis of the relationship between debt and financial development in Africa is undertaken. Employing panel fixed effect regression analysis of data from 31 Africa countries, selected on the basis of data availability and using the ratio of private sector credit to Gross Domestic Product as proxy of financial development, a significant and positive relationship was found to exist between debt service and financial development in Africa. The country specific OLS results showed that while Cabo Verde, Mali, Mozambique, Niger, Rwanda, Burkina Faso, Burundi, Kenya and Senegal recorded significant positive relationship between debt and financial development in the region, the relationship was negative for Nigeria. The study concludes that whereas the 'safe asset' hypothesis holds for Africa as a whole, the 'lazy bank' hypothesis holds in few countries including Nigeria
Keywords: