Work

Foreign direct investments, institutional structure and economic growth in Sub-Saharan Africa

Year: 2025

Type: article

Abstract: Economic growth is desirable for improved macroeconomic performance in Sub-Sahara Africa (SSA). Economics literature documents that foreign direct investment (FDI) promotes economic growth when the economy’s absorptive capacity is adequate. Though data show that SSA countries are both the destinations and sources of FDI flows, economic growth remains low. Hitherto, studies on SSA neither considered the effects of FDI outflows nor the relevance of institutional structure in the FDI-economic growth nexus, thereby misrepresenting FDI-economic growth relationships. Therefore, using 27 years (1996–2022) data from 29 SSA countries, this study deployed the System-GMM to examine the SSA’s FDI-economic growth nexus and the role of institutional structure. Results showed that FDI inflow and outflow promoted economic growth, while weak institutional structure dampened the economic growth effects of FDI flows. Therefore, the paper emphasized the need for more FDI flows, strengthened institutions, and deepened financial sectors to enhance economic growth.

Source: Discover Sustainability

DOI: 10.1007/s43621-025-01761-1

Authors: Andy Titus Okwu, Oluwaseyi Adedayo Adelowokan, Bukonla Grace Osisanwo

Institution: Olabisi Onabanjo University

Language: English

Topic: International Business and FDI

Subfield: Strategy and Management

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Decent work and economic growth, Industry, innovation and infrastructure

Open Access status: gold

Estimated APC paid: $1,390