Payment Digitization and Industrial Activity Nexus: Comparative Evidence from Key Sub-Saharan African Economies.

This study investigates how digital payment affects industrial sector activity in selected Sub-Saharan African countries. The selected countries are Nigeria and South Africa, which are the largest economies in the sub-region with rapid adoption of digital payment. The investigation is motivated by the strategic importance of the payment system in facilitating industrial production and turnover. The methodologies of unrestricted error correction model (UECM) and dynamic ordinary least squares model (DOLS) are employed in the study. The UECM results show that the adoption of digital payment impacted significantly on industrial sector activity in both countries. The impact is, however, lower than the impact of physical capital, human capital, and personal income. The positive role of digital payment is, therefore, strongly complemented by the three variables. On the other hand, trade openness has an insignificant effect, which indicates a relatively weak role in facilitating industrial activity. The DOLS results are not significantly different from the UECM results, which indicates that the estimated impacts on industrial activity are consistent. The findings suggest the need to deepen the digital payment system, in order to sustain its role in industrial production and expansion. This could be done by strengthening the internet technology that is used in digital payment. Furthermore, the role of physical and human capital needs to be sustained by encouraging capital investment, while that of personal income may be sustained by reducing income tax. The low effect of trade openness could be improved by controlling the import of industrial goods. [ABSTRACT FROM AUTHOR]