Sectoral capital flows and economic growth: What do we know about the dynamics? Judith Tyson, ODI Victor Murinde, University of Birmingham ESRC Reference: ES/N013344/1: Delivering Inclusive Financial Development and Growth Research Project Workshop SOAS University of London 3rd – 4th March, 2017

Introduction & Motivation Important to understanding the relationship of capital flows & growth Current literature examines flows by source (FDI, portfolio, bank lending) and shows considerable variances across countries & periods - it is not fully understood what are the intermediating variables The study will look at whether sectors receiving flows are a differentiating factor in growth impact It will comprise a literature review & empirical work Empirical work will include (i) regression analysis against measures of GDP growth, productivity and poverty levels; and (ii) comparative country analysis

Empirical work will use a new database of capital flows by sector All types of private capital flows International - FDI, portfolio (bonds and equity) and bank lending Domestic – bank lending, bond and equity Capital markets primary issuances Data Multiple sources e.g. Central banks, national statistics, national investment authorities, stock exchanges, research papers Reconciled to the World Bank Development Database totals 10 years from 2006 to 2015 Gaps to be addressed (i) some 2015 data not yet published; (ii) some weaknesses in FDI by sector data Excludes self-funded investments & short term government lending (e.g. Treasury bills)

16 sample countries – Sample is all SSA excluding fragile states, small states, offshore financial centers and those without adequate data. Shaded countries have been completed and others in progress. SAMPLE   PPP USD GDP (2015 - current US$) Fragile state* No data/poor data Small state* Total sample Guinea GIN 1,120 6,699,203,543 1 - Malawi MWI 1,140 6,565,382,259 Mozambique MOZ 1,170 14,688,606,238 Togo TGO 1,320 4,002,723,817 Madagascar MDG 1,400 9,980,522,718 Comoros COM 1,430 .. Guinea-Bissau GNB 1,450 1,056,851,008 Sierra Leone SLE 1,560 4,474,689,706 Liberia Gambia, The GMB 1,580 Ethiopia ETH 1,620 61,537,143,095 South Sudan SSD 1,630 9,015,221,096 Burkina Faso BFA 1,640 11,099,473,097 Zimbabwe ZWE 1,700 13,892,940,504 Rwanda RWA 1,720 8,095,980,014 Uganda UGA 1,780 26,369,242,278 Benin BEN 2,100 8,476,125,181 Chad TCD 2,110 10,888,798,114 Mali MLI 2,360 13,100,263,697 Senegal SEN 2,390 13,779,570,706 Tanzania TZA 2,620 44,895,392,077 Kenya KEN 3,060 63,398,041,540 Cameroon CMR 3,080 29,198,372,811 Lesotho LSO 3,160 São Tomé and Principe STP Côte d'Ivoire CIV 3,240 31,752,543,539 Zambia ZMB 3,660 21,201,564,248 Ghana GHA 4,070 37,864,368,220 Nigeria NGA 5,800 481,066,152,870 Congo, Rep. COG 6,300 8,553,154,506 Cabo Verde CPV 6,390 1,629,759,975 Angola AGO 6,450 102,643,104,696 Swaziland SWZ 8,040 4,060,072,444 Namibia NAM 10,380 11,546,088,223 Botswana BWA 15,600 14,390,863,395 Equatorial Guinea GNQ 16,450 9,397,792,253 Gabon GAB 18,810 14,339,723,935 Mauritius MUS 19,290 11,510,952,257 Seychelles SYC 25,760 1,437,722,206 TOTAL 10 8 5 16

An example of the actual database for Nigeria An example of the actual database for Nigeria. Includes a 4 and a 9 sector analysis as well as by source 1. Field for source i.e. FDI, bank lending, portfolio ; plus domestic vs international Data fields Sources include Central Bank of Nigeria, World Economic Forum, World Bank Development Database (Including reconciling to total flows by category from the WBDD), Nigerian Stock Exchange, London Stock Exchange, Euromoney database 2. Field for 4 sectors i.e. firm, household, government and other 3. Field for 9 sectors i.e. more detailed firm level capital flows

Example of a database query: Regional capital stock by sector TOTAL FINANCING STOCK BY SECTOR

We can also use the database for more detailed analysis by sector or country An example by country for Nigeria: (i) Capital stock by sector

And for Nigeria (ii) Capital stock by source

An example by sector : Manufacturing (i) total flows relative to GDP as as a percent of stock… Note: These are from a working draft on financing for manufacturing

… (ii) the sources of manufacturing financing

… and (iii) which countries have been the recipients

Next steps Complete the database including 2015 data Prepare the regression analysis Working papers on sectors and comparative country analysis in preparation