The Significance of Foreign Direct Investment to the Economic Development of Sub Saharan Economies

Abstract

This paper attempts to evaluate the impact of Foreign Direct Investment on the economic development of forty three (43) countries in Sub Saharan Africa. The Auto Regressive Vector (VAR) model was employed to effectuate econometric estimations, using annual data obtained from the database of the World Bank: World Development Indicators-WDI, 2018 for the period spanning from 1997 to 2017. The findings show that FDI has a negligible impact on the economic development of the countries studied; whereas economic development has a positive and strong impact on FDI. It is therefore recommended that: first African countries should develop value chains and attract FDI geared towards the transformation of their natural resources; and second they should improve pro-industry elements like adequate electricity supply, good transportation network, reduce corruption, and boost technological development to harness and accelerate their economic transformation.

Keywords: Foreign Direct Investment, Economic Development, Sub Saharan Economies