The Determinants of Foreign Direct Investment Inflows to English Speaking Sub-Saharan West Africa: A Dynamic Panel Data Analysis

Abstract

The objective of the research exploration was the macroeconomic determinants of foreign direct investment (FDI) inflows to English speaking Sub-Saharan West Africa for the period, 2002-2017. The research methodology was quantitative, and the applicable data were time series with 80 observations and 6 variables. Applying the dynamic panel data model, the results revealed trade openness and inflation had negative and statistically significant associations with FDI inflows. The findings also indicated population growth had a positive and significant relationship with FDI inflows. Obviously, the strong negative impact of inflation on FDI inflows signaled macroeconomic instability in the region, which may create a latent risk for foreign investments. Additionally, the strong negative impact of trade openness on FDI was, perhaps, the attempt by multinationals to circumvent trade barriers through the localization of production in the host market because of difficulties of importing their products into the host region. The results had substantial applied and policy inferences because of the expressive need for low inflation rate and open economic activities, to augment macroeconomic stability, market and economic growth, which may reduce the latent risk to transnational stakeholders that could help upsurge FDI inflows to the region.