The Determinants of FDI in Sub-Saharan Economies: A Study of Data from 1990–2017

Abstract

Foreign Direct Investment (FDI) can bring in much needed capital, particularly to developing countries, help improve manufacturing and trade sectors, bring in more efficient technologies, increase local production and exports, create jobs and develop local skills, and bring about improvements in infrastructure and overall be a contributor to sustainable economic growth. With all these desirable features, it becomes relevant to ascertain the factors which attract FDI to an economy or a group of adjacent economies. This paper explores the determinants of FDI in ten sub-Saharan economies: Liberia, Sierra Leone, Ivory Coast, Ghana, Nigeria, Mali, Mauritania, Niger, Cameroun, and Senegal. After an extensive literature review of theories and empirical research, using a set of cross-sectional data over the period 1990-2017, two econometric models are estimated with FDI/GDP (the ratio of Foreign Direct Investment to Gross Domestic Product) as the dependent variable, and with inflation, exchange rate changes, openness, economy size (GDP), income levels (GNI/capita (Gross National Income) per capita), and infrastructure as the independent variables. Over the period, higher inflows of FDI in relation to GDP appear to be have been attracted to the markets with better infrastructure, smaller markets, and lower income levels, with higher openness and depreciation in the exchange rate, though the coefficients of the last two variables are not significant. These results show the type of FDI attracted to investments in this region and are evaluated from theoretical and practical viewpoints. FDI is an important source of finance for developing economies. On average, between 2013 and 2017, FDI accounted for 39 percent of external finance for developing economies. Policy guidelines are formulated for the enhancement of FDI inflows and further economic development in this region. Such a study of this region has not been made in the recent past.

The impact of corruption and university education on African innovation: evidence from emerging African economies

“…FDI in Africa predetermines the faith of innovation. Thus, innovation can be improved with the provision of adequate FDI through the appropriate means (Jaiblai and Shenai 2019). Loukil (2020) emphasized that financial resources are the direct element of technological development.…”

“…However, unlike African countries, the export of high-tech export is insignificant hence, most African countries heavily dependent on the importation of high-tech products from developed nations (Bayraktutan and Bıdırdı 2018). Other studies (Asiedu 2002;Jaiblai and Shenai 2019) have also indicated that, African countries receive FDI as a form of technology development. This, consequently, highlights the impact of FDI on the development of African countries instead of the exportation of technology from African.…”

Analisis Pengaruh Tenaga Kerja dan Pengeluaran Pemerintah (Infrastruktur) terhadap Investasi di Indonesia

“…Hal ini karena infrastruktur merupakan prasarana publik primer dalam mendukung kegiatan ekonomi Indonesia, dan keterse-diaan infrastruktur sangat menentukan tingkat efisiensi dan efektivitas kegiatan ekonomi. Infrastruktur diartikan sebagai layanan utama dari suatu negara yang dapat menunjang keberlangsungan kegiatan masyarakat dan kegiatan ekonomi dengan menyediakan transportasi dan fasilitas pendukung lainnya (Jaiblai & Shenai, 2019). Infrastruktur yang memadai di Indonesia akan mengakibatkan efisiensi pada dunia usaha, sehingga investasi yang didapat semakin meningkat.…”

Does Openness, and Productivity Matters for FDI: A Global Interactive Analysis Based on the Complementary Role of Institutions

“…There is a lack of study focusing on the consequence of FDI on different variables like growth, finance, economic development, North vs the South convergence, etc. (Alfaro & Chauvin, n.d.;Demena, n.d.;Demir & Duan, 2018;Dupasquier & Osakwe, 2006;Eddine, n.d.;Elkhuizen et al, 2018;Francis et al, 2009;Hallam, 2011;Hausmann & Fernández-Arias, n.d.;Herzer et al, 2008;Jaiblai & Shenai, 2019;Kose et al, 2009) Most of these studies absorbed on the spillover special effects of FDI on the economies. Many studies also focused on the spillover effect of FDI on productivity (Ajide & Raheem, 2016;Albuquerque, 2003;Bhattacharyya, 2012;Cleeve, 2008;Kose et al, 2009;Nunnenkamp, 2001;Singh, 2003).…”