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What Drives Foreign Direct Investment in Africa? An Empirical Investigation with Panel Data

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  • Abdoul’ Ganiou Mijiyawa

Abstract

type="main" xml:lang="en"> This paper analyzes factors that drive foreign direct investment (FDI) in Africa. To do so, for the first time in the literature, the paper uses 5-year panel data and the system-GMM technique over the period 1970–2009. The main results are as follows: (a) larger countries attract more FDI; (b) regardless of their size, however, more open countries, politically stable countries, and countries offering higher return to investment also attract FDI; (c) FDI inflows are persistent in Africa. This suggests that countries that manage to attract FDI today are likely to attract more FDI in the future.

Suggested Citation

  • Abdoul’ Ganiou Mijiyawa, 2015. "What Drives Foreign Direct Investment in Africa? An Empirical Investigation with Panel Data," African Development Review, African Development Bank, vol. 27(4), pages 392-402, December.
    • Handle: RePEc:bla:afrdev:v:27:y:2015:i:4:p:392-402
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    Cited by:

    1. Bruno Emmanuel Ongo Nkoa, 2018. "Determinants of foreign direct investment in Africa: An analysis of the impact of financial development," Economics Bulletin, AccessEcon, vol. 38(1), pages 221-233.
    2. Godwin Okafor & Jenifer Piesse & Allan Webster, 2017. "FDI Determinants in Least Recipient Regions: The Case of Sub†Saharan Africa and MENA," African Development Review, African Development Bank, vol. 29(4), pages 589-600, December.
    3. Jonathan E. Ogbuabor & Anthony Orji & Charles O. Manasseh & Onyinye I. Anthony-Orji, 2020. "Institutional Quality and Growth in West Africa: What Happened after the Great Recession?," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 26(4), pages 343-361, November.
    4. Khouiled, Brahim & Saheb, Oualid, 2019. "جودة مؤشرات الحوكمة وأثرها في التقليل من تقلبات صافي الاستثمار الأجنبي المباشر في دول Mena للفترة 1996-2017 : مقاربة نموذج بانل الديناميكي [The quality of governance indicators and their impact in ," MPRA Paper 109308, University Library of Munich, Germany.
    5. Alemayehu Geda & Addis Yimer, 2024. "What Drives Foreign Direct Investment into Africa? Insights from a New Analytical Classification of Countries as Fragile, Factor-Driven, or Investment-Driven," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 14199-14234, September.
    6. Ernest Nkansah‐Dwamena & Hyunsoo Yoon, 2022. "Why is sub‐Saharan Africa an attractive destination to foreign land grabbers? Evidence from country characteristics," African Development Review, African Development Bank, vol. 34(2), pages 280-292, June.
    7. Tugba Zeydanli, 2017. "Elections and Subjective Living Conditions in Sub†Saharan Africa," African Development Review, African Development Bank, vol. 29(4), pages 545-561, December.
    8. Amendolagine, Vito & Prota, Francesco, 2021. "Bilateral investment treaties and backward linkages in Sub-Saharan Africa," International Economics, Elsevier, vol. 165(C), pages 172-185.
    9. Kimiagari, Salman & Mahbobi, Mohammad & Toolsee, Tushika, 2023. "Attracting and retaining FDI: Africa gas and oil sector," Resources Policy, Elsevier, vol. 80(C).
    10. Rodrigo Martins & Jorge Cerdeira & Miguel Fonseca & Mohamed Barrie, 2022. "Foreign direct investment determinants in Mano River Union countries: Micro and macro evidence," South African Journal of Economics, Economic Society of South Africa, vol. 90(3), pages 408-424, September.
    11. Oludotun Fasanya, David & Ingham, Hilary & Read, Robert, 2022. "Determinants of internationalisation by firms from Sub-Saharan Africa," Journal of Business Research, Elsevier, vol. 144(C), pages 951-965.
    12. Philip Ifeakachukwu Nwosa & Temidayo Oladiran Akinbobola, 2016. "Capital Inflows and Economic Growth in Nigeria: The Role of Macroeconomic Policies," African Development Review, African Development Bank, vol. 28(3), pages 277-290, September.
    13. Amr Hosny, 2020. "Nonresident holdings of domestic debt in Nigeria: Internal or external driven?," African Development Review, African Development Bank, vol. 32(3), pages 472-485, September.
    14. Dondashe, Nandipha & Phiri, Andrew, 2018. "Determinants of FDI in South Africa: Do macroeconomic variables matter?," MPRA Paper 83636, University Library of Munich, Germany.
    15. Abdalwali Lutfi & Maryam Ashraf & Waqas Ahmad Watto & Mahmaod Alrawad, 2022. "Do Uncertainty and Financial Development Influence the FDI Inflow of a Developing Nation? A Time Series ARDL Approach," Sustainability, MDPI, vol. 14(19), pages 1-11, October.
    16. Ozekhome, Hassan O., 2022. "Tax and Foreign Direct Investment in Nigeria: A Dynamic Estimation Approach," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 47(2), pages 115-124, June.
    17. Thales Pacific Yapatake Kossele & Li Jin Shan, 2018. "Economic Security and the Political Governance Crisis in Central African Republic," African Development Review, African Development Bank, vol. 30(4), pages 462-477, December.
    18. Oumarou Zallé & Idrissa M. Ouédraogo, 2021. "Spillover effects of corruption and democracy on territorial attractiveness of foreign direct investment in sub‐Saharan Africa," African Development Review, African Development Bank, vol. 33(4), pages 756-769, December.
    19. Bruno Emmanuel Ongo Nkoa & Jacques Simon Song, 2017. "Analyse des effets de la qualité des institutions sur la volatilité des Investissements Directs Etrangers en Afrique," African Development Review, African Development Bank, vol. 29(4), pages 674-688, December.
    20. Parfait Bihkongnyuy Beri & Gabila Fohtung Nubong, 2021. "Impact of bilateral investment treaties on foreign direct investment in Africa," African Development Review, African Development Bank, vol. 33(3), pages 439-451, September.
    21. Anayochukwu Basil Chukwu & Adeolu O. Adewuyi & Adebowale M. Adeleke & Banji B. Awodumi & Tobechi F. Agbanike, 2022. "Modelling composition of growth, FDI and welfare in Africa: a SEM approach," Economic Change and Restructuring, Springer, vol. 55(4), pages 2445-2478, November.
    22. EBIRE, Kolawole & ONMONYA, O. Lucky & INIM, V. Ekemini, 2018. "Effects of the Determinants of Foreign Direct Investment in Nigeria: Error Correction Mechanism," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 5(2), pages 155-164.

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