Financial development, economic growth, corruption, and environmental degradation in Sub-Saharan Africa

This study examines the impacts of financial development and corruption on the environmental degradation and economic growth of eight selected Sub-Saharan African (SSA) countries, namely Angola, Ghana, Kenya, Namibia, Nigeria, Senegal, South Africa, and Tanzania, using Pedroni cointegration test and fully modified ordinary least squares method (FMOLS) from 2000 to 2014. The result of cointegration tests shows that the variables used in the models have long run relationships. From the FMOLS results, the study finds a positive and significant impact of financial development, economic growth, trade openness and corruption on environmental degradation. However, energy use is found to be insignificant in explaining environmental degradation in those countries. Moreover, results from the economic growth model show that financial development, energy consumption, and corruption have positive effect on economic growth while trade openness has negative effect. It is also found that the interaction of financial development and corruption positively influences environmental degradation while it has negative and significant impact on economic growth. There is also evidence that validates the existence of the environmental Kuznets curve (EKC) hypothesis in those SSA countries. The study provides significant information that may be beneficial to policymakers in making appropriate policies in the region. Research implications suggest that there should be policy reform that could enhance rural banking, and efficient credit allocation to users of low emissions technologies, renewable energy, like wave power, biofuel, biogas and solar energy, among others, in order to achieve environmental quality as well as viable economic growth. Above all and based on the current findings, it is recommended that refine anti-corruption measures should be put in place to tackle all aspects of corruption in those countries.