IMPACT OF FOREIGN DIRECT INVESTMENT INFLOWS ON ECONOMIC GROWTH IN SUB-SAHARA AFRICA

Abstract

As the global economy becomes more interconnected, foreign direct investment (FDI) has become prevalent in nearly every country. A notable trend is the concentration of FDI inflows towards developing nations, driven by emerging opportunities and substantial market potential. Nonetheless, there are ongoing debates surround the actual impact of FDI on the economies of developing countries. Therefore, this study examined the impact of foreign direct investment on economic performances in sub-Saharan Africa using panel autoregressive distributed lag techniques from 2000 to 2022. The findings of the study revealed that FDI increases economic growth and inflation rate in Sub-Saharan African countries. Moreover, the coefficient of the error correction model was negative and significant indicating that the short-run disequilibrium is corrected in the long-run. Given the significant role of foreign direct investment inflows in influencing growth in sub-Saharan Africa, it is recommended that SSA countries should invest in renewable energy as well as technologies so as to attract more FDI.