Do Terrorist Attacks Deter Foreign Investors from Entering African Markets?

Kazeem Bello Ajide

International Economic Journal, 2025, vol. 39, issue 3, 531-567

Abstract: This study examines the impact of rising terrorist activities on Foreign Direct Investment (FDI) across 41 African economies from 1980 to 2020. Using a two-step dynamic Generalized Method of Moments (GMM) approach, the findings reveal a persistent negative relationship between terrorist attacks – including non-fatal injuries, fatalities, and attack severity – and FDI inflows. Notably, the severity of incidents amplifies this adverse effect, with more severe attacks leading to sharper declines in FDI. While most terrorist tactics significantly deter FDI, exceptions exist, such as unarmed assaults and assassinations. However, suicidal attacks exert a particularly pronounced negative impact. Additionally, various economic and developmental factors, such as GDP growth, trade openness, and infrastructure quality, influence FDI patterns. Overall, the study highlights the urgent need to combat terrorism to enhance FDI attraction. Establishing a secure and stable investment climate is crucial for sustaining FDI inflows and fostering economic growth across African nations.

Date: 2025
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DOI: 10.1080/10168737.2025.2484759

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