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The Nexus Between Foreign Direct Investment and Foreign Aid: An Analysis of Sub-Saharan African Countries

Author

Listed:
  • Kafayat Amusa
  • Nara Monkam
  • Nicola Viegi

    (University of South Africa)

Abstract

Funding constraints experienced by sub-Saharan Africa (SSA) countries have led to reliance on foreign direct investment (FDI) and foreign aid as alternative sources of finance. Despite the importance of FDI for growth and development, SSA’s share in global FDI inflows trails that of other developing regions. This study examines the role of foreign aid in enhancing FDI inflows to 31 SSA countries from 1995-2012. Using multilevel analysis, the results suggest that productive infrastructure aid is complementary to FDI inflows and socio-economic infrastructure aid has no significant impact on FDI inflows. Additionally, the results indicate that oil producing countries that receive both productive sector and socioeconomic sector aid receive less FDI when compared to non-oil producing SSA countries.

Suggested Citation

  • Kafayat Amusa & Nara Monkam & Nicola Viegi, 2016. "The Nexus Between Foreign Direct Investment and Foreign Aid: An Analysis of Sub-Saharan African Countries," The African Finance Journal, Africagrowth Institute, vol. 18(2), pages 45-68.
    • Handle: RePEc:afj:journl:v:18:y:2016:i:2:p:45-68
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    More about this item

    Keywords

    Foreign Aid; Foreign Direct Investment; sub-Saharan Africa; Multilevel Analysis;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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