oa Business Management Review - Determinants of FDI inflows to African countries: a panel data analysis

Volume 9, Issue 1
  • ISSN : 0856-2253



The study examines the key determinants of FOI inflows to African countries. One of the key determinants investigated is related to the stance of governance in the African countries. A panel data estimation approach is used to estimate the determinants. The study finds that governance is positively related to FOI inflows, although the coefficient is not significant. The stability of political regimes is also an important determinant of FOI inflows to African countries. Other important determinants are; population size, level of industrialisation, and aid received per capita, Although the level of infrastructure as provide by the number of telephones is positively related to FOI inflows, the coefficient is insignificant The level of government involvement in the economy as provided by government consumption as a percentage of GOP is negatively related to FDI inflows. Several policy implications are drawn from the study. Firstly, population size, which proxies the market size is important for attracting FOL The practical and rational way of expanding the market size is to integrate economies of individual countries into regional blocs. It also seems that FOI inflows into a country are adversely affected by the government's over-involvement in the economy. Increasing the GOP share of the private sector seems to be good for attracting FOL In spite of the Insights offered by the empirical results, one shortcoming of this study is that data on natural resource endowments of countries could not be obtained for use in the estimation of the determinants of foreign direct investment The stylised facts indicate that endowment of natural resources is one of the determinants of FOI inflows.

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