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Put on the light! Foreign direct investment, governance and access to electricity

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  • Aluko, Olufemi Adewale
  • Opoku, Eric Evans Osei
  • Ibrahim, Muazu
  • Kufuor, Nana Kwabena

Abstract

Despite efforts and commitments to achieve universal coverage of electricity, overall access in Africa is below expectation, making the attainment of the United Nations' Sustainable Energy for All Initiative almost a mirage for this region. The inability to mobilize adequate domestic financial resources and a seeming lack of political will (reflected in governance) have been highlighted as two of the major bottlenecks in the development of electricity infrastructure in African regio. Regarding inadequate financial resources, we argue that inflows of foreign direct investment (FDI) and the influx of multinational enterprises can help a great deal. To this end, we investigate the impact of FDI on access to electricity and further examine whether this impact is contingent on the governance architecture. Using a sample of 36 African countries, and the instrumental variable (IV) approach to the generalized method of moments (GMM), our results suggest that, for the most part, the direct impacts of FDI and governance on access to electricity are positive. The role of governance in the FDI impact on electricity was established.

Suggested Citation

  • Aluko, Olufemi Adewale & Opoku, Eric Evans Osei & Ibrahim, Muazu & Kufuor, Nana Kwabena, 2023. "Put on the light! Foreign direct investment, governance and access to electricity," Energy Economics, Elsevier, vol. 119(C).
    • Handle: RePEc:eee:eneeco:v:119:y:2023:i:c:s0140988323000610
    DOI: 10.1016/j.eneco.2023.106563
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    2. Noumba, Issidor & Nguea, Stéphane Mbiankeu, 2023. "Assessing the role of globalization for universal electricity access," International Economics, Elsevier, vol. 174(C), pages 180-195.
    3. Yu Zhong & Jian Li & Shuochen Luan & Yixuan Wang, 2024. "How Does Foreign Direct Investment Impact the Sustainable Development? Empirical Evidence from China’s Coastal Areas," Sustainability, MDPI, vol. 16(12), pages 1-23, June.
    4. Jian Li & Lingyan Jiang & Bao Jiang & Shuochen Luan, 2023. "How Does FDI Enhance Urban Sustainable Competitiveness in China?," Sustainability, MDPI, vol. 15(13), pages 1-18, June.
    5. Opoku, Eric Evans Osei & Acheampong, Alex O. & Aluko, Olufemi Adewale, 2024. "Impact of rural-urban energy equality on environmental sustainability and the role of governance," Journal of Policy Modeling, Elsevier, vol. 46(2), pages 304-335.
    6. Mengya Shang & Noha Aleesa & Abdulrasheed Zakari, 2023. "Sustainable Energy Supplies in Developing Countries: Does National Governance Matter?," Energies, MDPI, vol. 16(18), pages 1-13, September.

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    More about this item

    Keywords

    FDI; Governance; Electricity access; Africa;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • P18 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Energy; Environment
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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