Determinants of Foreign Direct Investment Inflows to Sub-Saharan Africa : a panel data analysis

Abstract: Most countries in the world are working hard to attract more foreign direct investment. Identifying the key determinants of foreign direct investment is therefore seen as a crucial task for policy makers. Compared to other parts of the world, the performance of Sub-Sahara African countries in attracting foreign direct investment is poor. This study deals with identifying the determinants of foreign direct investment inflow in Sub-Saharan Africa. The study employed panel data analysis: pooled ordinary least square method, fixed effects and Random Effect methods. Fourteen Sub-Saharan Africa countries were sampled for the study. Trade openness, gross domestic product, gross domestic product growth, gross domestic product per capita, telephone line (per 100 people), gross fixed capital formation, inflation and the lag of FDI are explanatory variables while the stock of FDI inflow is dependent variable. The analyzed data covered for the period 1986-2010.  The study finding shows that trade openness, gross domestic product, inflation, and lag of FDI are the most significant determinants of foreign direct investment inflows to sub-Saharan Africa.