Foreign Direct Investment and Economic Growth in Africa: Evidence from Oil Exporting Countries

Abstract

It has been observed that the catalogue of empirical studies on FDI inflows in Africa in the recent time focused on determinants of FDI inflows in the continent. Meanwhile, the studies that examined the aftermath effects of FDI inflows on the economic growth of the entire continent cannot be totally insulated from heterogeneity problems. Therefore, this paper pooled the first three biggest economies with similar economic structure and examined the relationship between FDI inflows and economic growth in the last 28 years. However, the finding that originated in this study submitted that FDI has a positive relationship with economic growth in the selected countries. The coefficient of FDI shows that a unit change in FDI leads to 5.6138 increment in economic growth of the countries, though not significant at 5% level of significance. Consequently, due to the findings that emerged in this study, it is expedient that this paper recommends the following; the policy makers in Nigeria, South Africa and Egypt in particular and African continent as a whole should see FDI as a variable that has the potential capacity to propel economic growth of the continent. Therefore, all hands must be on deck by the policy makers in this continent to formulate appropriate policy measures that will create a friendly and attractive investment climate for foreign investors. This in turn will catalyze further inflows of FDI in the continent. Hence, a sustainable growth will be guaranteed in the long run