Social Risk and Regional Financial Integration: A Comparative Analysis Between Nigeria and South Africa

The study explored the relationship between social risk and regional financial integration in Nigeria and South Africa from 2006 to 2022. It examined how religion, ethnic tension, socioeconomic conditions, and law and order influence net capital inflow. The study employed Ordinary Least Squares (OLS) regression and the Autoregressive Distributed Lag (ARDL) modelling approach for econometric estimation and inference. The findings demonstrate that socioeconomic conditions significantly impede net capital inflow in Nigeria and South Africa, representing the primary social risk factor hindering regional financial integration. Religious affiliation showed mixed effects across countries, while ethnic tension and rule of law demonstrated statistically insignificant relationships with capital flows. The findings highlight adverse socioeconomic conditions as the most critical social risk factor constraining financial integration between these two major African countries. Enactment of policies that make the environment suitable for profitable investments and re-evaluate investor-unfriendly rules and order, will enhance trade and capital inflow.