Impact of Financial Development on Foreign Direct Investment (fdi) Inflows in West Africa
Year: 2026
Type: article
Abstract: Research Problem: Financial systems in many West African countries remain fragmented, characterized by weak financial institutions, limited credit availability, underdeveloped capital markets, low banking penetration, and a dominant informal economic sector. These structural weaknesses ultimately reduce the region’s attractiveness to foreign investors. Methods/Theory: The research use a panel data approach, in which covers different selected West African countries. Secondary data are obtained from the World Bank’s World Development Indicators (WDI), International Monetary Fund (IMF) and UNCTAD databases. Key variables include FDI inflows, indicators of financial development (like the domestic credit to the private sector, financial depth and stock market capitalization), with control variables such as trade openness, inflation, and GDP growth. Using econometric techniques such as fixed effects and Random effects, The theoretical adopted for this study is based on the Eclectic Paradigm theory . Result: the study reveals that examining financial development significantly and positively influences FDI inflows, especially through credit availability and banking sector efficiency. However, less developed capital markets and weak regulatory frameworks remain hindrance in some countries. Conclusion: The study concludes that empowering financial institutions, promoting financial inclusion, and improving regulatory oversight are important to attract sustained foreign investment. Key Contribution to Knowledge: it advance the literature on the finance-FDI nexus by shifting attention from broad continental analyses to a focused subregional examination of west African economies, thereby providing context-specific empirical evidence often overlooking in existing studies. Recommendation: the study recommend that West Africa policymakers must prioritize financial sector reforms as a strategic pathway to increase FDI inflows, nourish economic growth and ignite the region competitively into the global economy.
Author: Biliqees Ayoola Abdulmumin
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W7225019052