Foreign Direct Investment and Economic Development in Africa

Folasade Bosede Adegboye (), Joshua Adewale T Ojo and Felicia Omowunmi Olokoyo
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Folasade Bosede Adegboye: Department of Banking and Finance, Covenant University, Nigeria
Joshua Adewale T Ojo: Department of Banking and Finance, Covenant University, Nigeria
Felicia Omowunmi Olokoyo: Department of Banking and Finance, Covenant University, Nigeria

Journal of Internet Banking and Commerce, 2017, vol. 22, issue 01, 01-15

Abstract: Africa unlike other developing regions of the world has experienced declining flows of foreign direct investment (FDI).The flow of FDI is expected to result into gradual reduction in reliance on external borrowed capital and acceleration of economic development. The study examined the declining flow of FDI to the African regions as well as the impact that it has had on economic development of the region, using the proxies of Income per capita, Life expectancy and Education indices. The study made use of pooled data from thirty nine African countries within the period 1993 and 2012.The method of analysis utilized for the study was the fixed effect least-square dummy variable model, employed to estimate the impact of foreign direct investment on economic development for the selected host African countries. The study finds that foreign direct investment is statistically significant in relation to economic development for host African countries. It is therefore recommended that the governments of host countries should consider closely the sectors that FDI flows into, encourage investment domestically in such sectors such that dependence on external financial flows could be reduced, resulting in sustained increases in income, literacy level and hence improved life expectancy which are expected to result into sustained economic development.

Keywords: Foreign Direct Investment; Economic Development; Host African Countries; Education; Income Per Capita; Life Expectancy (search for similar items in EconPapers)
JEL-codes: A11 (search for similar items in EconPapers)
Date: 2017
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