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FDI Flows to Sub-Saharan Africa: The Impact of Finance, Institutions, and Natural Resource Endowment


  • Abel E Ezeoha

    (Department of Banking and Finance, Ebonyi State University, Abakaliki, Ebonyi State 09234, Nigeria.)

  • Nicolette Cattaneo

    (Department of Economics and Economic History, Rhodes University, South Africa.)


Using a panel data from 38 Sub-Sahara African (SSA) countries and a dynamic system GMM model, this study examines the individual and interactive impact of financial development, institutional quality, and natural resource endowment on both the stock and the flow of inward foreign direct investment (FDI) to the region. It finds that inward FDI is more dynamic in non-resource-rich than in resource-rich countries; that in non-resource-rich countries, foreign investors rely more on the efficiency of the governance institutions, but in resource-rich countries, the formal financial system provides alternative platform for managing the stock of existing FDI, as well as for providing financial allocative and intermediation roles; that the impact of natural resource endowment and macroeconomic factors are more robust in the stock than it is in the flow of inward FDI; that the capacity of an SSA country's financial system to attract and support foreign investments is dependent on the quality of her telecommunication infrastructure, the quality of legal and governance structures, and the kind of FDI in question; that the positive impact of infrastructure on FDI depends on the size of a country's market; and that although natural resource endowment appears to be key source of inward FDI to SSA countries, its importance has diminished since the start of 2000.

Suggested Citation

  • Abel E Ezeoha & Nicolette Cattaneo, 2012. "FDI Flows to Sub-Saharan Africa: The Impact of Finance, Institutions, and Natural Resource Endowment," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 54(3), pages 597-632, September.
  • Handle: RePEc:pal:compes:v:54:y:2012:i:3:p:597-632

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    Cited by:

    1. Albulescu, Claudiu Tiberiu & Ionescu, Adrian Marius, 2018. "The long-run impact of monetary policy uncertainty and banking stability on inward FDI in EU countries," Research in International Business and Finance, Elsevier, vol. 45(C), pages 72-81.
    2. Leonce Ndikumana & Mare Sarr, 2016. "Capital Flight and Foreign Direct Investment in Africa: An Investigation of the Role of Natural Resource Endowment," SALDRU Working Papers 167, Southern Africa Labour and Development Research Unit, University of Cape Town.
    3. Shah, Mumtaz Hussain, 2016. "Financial development and foreign direct investment: The case of Middle East and North African (MENA) developing nations," MPRA Paper 82013, University Library of Munich, Germany.
    4. Husam Rjoub & Mehmet Aga & Ahmad Abu Alrub & Murad Bein, 2017. "Financial Reforms and Determinants of FDI: Evidence from Landlocked Countries in Sub-Saharan Africa," Economies, MDPI, Open Access Journal, vol. 5(1), pages 1-12, January.
    5. repec:spr:epolit:v:35:y:2018:i:1:d:10.1007_s40888-017-0086-y is not listed on IDEAS
    6. repec:rej:journl:v:21:y:2018:i:67:p:63-97 is not listed on IDEAS
    7. Adegoke Ibrahim Adeleke, 2014. "Fdi-Growth Nexus In Africa: Does Governance Matter?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 39(1), pages 111-135, March.
    8. repec:dug:actaec:y:2018:i:4:p:597-611 is not listed on IDEAS
    9. repec:ibn:ijefaa:v:9:y:2017:i:8:p:33-39 is not listed on IDEAS
    10. LĂ©once Ndikumana & Mare Sarr, 2016. "Capital flight and foreign direct investment in Africa An investigation of the role of natural resource endowment," WIDER Working Paper Series 058, World Institute for Development Economic Research (UNU-WIDER).
    11. repec:spr:portec:v:16:y:2017:i:3:d:10.1007_s10258-017-0136-y is not listed on IDEAS

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