SOURCE:

Faculty: Management Sciences
Department: Banking And Finance

CONTRIBUTORS:

Okafor, C. N.
Ibenta, S. N.
Okaro, C. S

ABSTRACT:

This study analyzed the major determinants of bond market development in Nigeria and South Africa. The scanty empirical evidence, which is mainly on developed and Asian economies coupled with mixed findings in related studies call for the need to examine the effect of major determinants of bond market development on the Nigerian and South African economy. The main objective is to examine the major determinants of bond market development in Nigeria and South Africa. The study employed expost facto research design involving a 24-year time series data that were mainly sourced from CBN statistical bulletin and the Debt Management Office (DMO), Bond Exchange of South Africa (BESA), South African Reserve Bank (SARB) statistical bulletin and online version of World Bank economic development indicators. The Ordinary Least Square OLS multiple regression was carried out. The results of this study are consistent and anchored on Rational Expectation Theory which asserts that macroeconomic factors have significant effects on financial markets, both in terms of asset returns and their volatility. The study found that Budget deficit and interest rate are determinants of government bond market development in Nigeria while budget deficit, interest rate, inflation rate, exchange rate and external debt are determinants of government bond market in South Africa. Stock market size and bank size drives the bond market positively in both countries. GDP has positive and significant effect on government bond market size in both countries while HDI has positive and significant effect on corporate bond market size for South Africa but negative effect in Nigeria. The study recommended that Government should maintain a stable macroeconomic environment for instance government should retain stable monetary and fiscal policies in order to fight inflation in the Nigerian economy, ensure effective governance and proper protection other financial sectors, strengthen the regulatory framework of the bond market, and engage in aggressive sensitization programme on the available opportunities in the bonds market.