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The Disappointing Performance of Foreign Direct Investment in Industrial Development in Sub-Saharan African Countries

Author

Listed:
  • Joshua Adewale T. Ojo

    (Department of Banking and Finance, Mountain Top University, Nigeria)

  • Folasade Bosede Adegboye

    (Department of Banking and Finance, Covenant University, Nigeria,)

  • Felicia Omowunmi Olokoyo

    (Department of Banking and Finance, Covenant University, Nigeria)

Abstract

The Sub-Saharan African (SSA) region compared to other developing regions has been the most vulnerable as regards foreign capital inflow. The flow of foreign direct investment (FDI) is expected to result into advanced managerial and technological capacities and acceleration of industrial development. The study examined how the flow of FDI to the SSA region has impacted the industrial development of the region, using the proxy of industry value added growth. The study made use of pooled data from thirty three SSA countries within the period 1993 and 2012. The method of analysis utilized for the study was the fixed effect least-square dummy variable model, employed to estimate the impact of FDI on industrial development for the selected host countries. The study finds that FDI is statistically significant in relation to industrial development for host SSA countries; but it is disappointing that the expected desired features of industrial development, like increased manufacturing outputs, reduction in high level of import and manufactured goods; etc., have not been realized. It is therefore recommended that the governments of host countries should put policies in place to encourage development of industries domestically, to enhance sustained industrial development, such that dependence on external financial assistance and borrowing could be reduced, resulting in sustained increases in non-oil export earnings, domestic income, savings, investment, technology, and hence improved living standard

Suggested Citation

  • Joshua Adewale T. Ojo & Folasade Bosede Adegboye & Felicia Omowunmi Olokoyo, 2017. "The Disappointing Performance of Foreign Direct Investment in Industrial Development in Sub-Saharan African Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 677-681.
    • Handle: RePEc:eco:journ1:2017-02-88
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    References listed on IDEAS

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    1. Rao, B. Bhaskara & Tamazian, Artur & Singh, Rup & Vadlamannati, Krishna Chaitanya, 2008. "Financial developments and the rate of growth of output: An alternative approach," MPRA Paper 8605, University Library of Munich, Germany.
    2. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Végh, 2005. "When It Rains, It Pours: Procyclical Capital Flows and Macroeconomic Policies," NBER Chapters, in: NBER Macroeconomics Annual 2004, Volume 19, pages 11-82, National Bureau of Economic Research, Inc.
    3. repec:aer:wpaper:165 is not listed on IDEAS
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    Cited by:

    1. Musa Oduola & Mustapha O. Bello & Rahmon Popoola, 2022. "Foreign Direct Investment, Institution and Industrialisation in Sub-Saharan Africa," Economic Change and Restructuring, Springer, vol. 55(2), pages 577-606, May.

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    More about this item

    Keywords

    Foreign Direct Investment; Industrial Development; Sub-Saharan African Countries;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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