HUMAN CAPITAL, FINANCIAL DEEPENING AND INDUSTRIAL GROWTH IN SUB-SAHARAN AFRICA

Abstract

This study examined the relationship between financial deepening, human capital and industrial outputs in sub-Saharan African countries. Specifically, the study investigated the effect of human capital and financial deepening on industrial output in sub-Saharan Africa. Data used covered 20 sub-Saharan African countries over the period from the year 1995 to 2025. The study employed Driscoll-Kraay estimation technique to capture the stated objective, with Panel Corrected Standard Errors (PCSEs) estimation for the robustness. The result reveals that human capital has significant negative effect on industrial output. The result also reveals that bank credit to private sector exerts positive but insignificant effect on industrial output. Additionally, the result for HK*BC, meaning that interaction between human capital and bank credit to private sector has significant negative effect on industrial output. This result therefore indicates that financial deepening measured as bank credit to private sector increases the negative effect of human capital on industrial output, thus confirming that financial deepening exhibit significant negative moderating effect on the relationship between human capital and industrial output across Sub-Saharan Africa”. The study, therefore, concludes that negative interaction effect between human capital and financial deepening implies that greater financial deepening weakens the contribution of human capital to industrial output in Sub-Saharan Africa. In line with the finding of this study, it was recommended that government should ensure that financial sector reforms relating to deeper access to credit are implemented alongside strategies aimed at improving workforce productivity in order to address inadequacy in human capital so as to stimulate industrial output.