EFFECT OF FINANCIAL RISK ON REGIONAL FINANCIAL INTEGRATION IN AFRICA

Abstract

The study examined the effects of financial risk on African regional financial integration covering 2008–2024. The study used panel regression analysis to assess the effect of loan default, delayed payments, losses from currency control, and expropriation of private investment on net capital inflow in South Africa and Nigeria. Loan default, payment delay, and expropriation of private investment all intensely reduce net capital inflow by -2.97%, -2.98%, and -2.02%, respectively, according to the research. Nevertheless, net capital inflow is positively affected, albeit somewhat, by losses from exchange control. The study established that there is a correlation between financial risk and the amount of investment flowing into Africa. More investment in Africa can only be encouraged if profit repatriation regulations are relaxed and loans are repaid on time.