Foreign Direct Investment in West Africa: A Case of Anglophone versus Francophone Countries

Abstract

This research was aimed at investigating the effect of foreign direct investment (FDI) on economic growth in thirteen (13) West African Anglophone and Francophone countries in the short and long term by using annual data from 1990 to 2021. From the auto-regressive distributed lag (ARDL) results, it was deduced that FDI has a long-run positive significant relationship with economic growth in the Anglophone region, but was not found statistically significant in the Francophone region. In addition, both regions exhibited an inverse relationship between FDI and GDP growth in the short run. From the findings, other variables such as gross fixed capital formation, exchange rates, and trade openness were statistically significant in driving GDP growth in the Anglophone region but not in the Francophone region, except for the exchange rate. Overall, it was concluded that FDI benefits the Anglophone region of West Africa more than the Francophone region. These findings suggested that lingual structures may play a dominant role in the attraction of FDI and other macroeconomic variables in these economies. Thus, there should be strong regulatory frameworks to improve FDI inflows through human capital development, political stability, a friendly business environment, and infrastructural development, as well as ensuring proper galvanisation and effective utilisation of investment funds in the regions.

Keywords

• economic growth
• foreign direct investment
• panel ardl
• trade openness
• west africa