National Energy Generation Capacity and Stock Market Development

Across the globe, stock markets provide mechanisms for allocating funds from surplus units to deficit units, thereby offering numerous benefits to economic agents. Despite these benefits, the current low level of African stock market development inhibits the continent's growth. It hampers the rapid realisation of its potential, thereby compelling investigation into the factors that mitigate or motivate development in the stock market. Consequently, this paper evaluates the impact of national energy generation capacity on stock market development in Africa. The findings suggest that a reduction in the incidence of poor energy generation has a positive effect on stock market development. The empirical analyses also reveal that this relationship is more pronounced for Sub-Saharan African countries and African countries with low GDP per capita. In effect, by increasing power generation, countries in Sub-Saharan Africa can stimulate interest and participation in their stock markets. Our study contributes to the call for additional policy interventions to address the deplorable state of power generation and distribution across most of Africa.