Determinants of foreign direct investment in ECOWAS region: An empirical analysis

Recent FDI inflows are moving further to more developed economies with proper economic infrastructure, highly skilled labor areas and to transitional economies rather than natural resource endowed areas typically Sub-Saharan African countries (SSA). ECOWAS has struggled to accumulate a proportionate amount of the FDI inflows to Africa despite having one of the biggest markets and is well endowed in resources. This work seeks to investigate what determines FDI in the ECOWAS using data from 1991 to 2016. A panel data analysis was conduct on 14 ECOWAS member states. According to the analysis, exchange rate and market openness have a positive effect on FDI attraction. GDP and natural resources were insignificant in determining FDI. When the two variables were regressed alone devoid of other variables against FDI, the result showed a positive statistically significant value. Inflation and unemployment rate had a negative effect on FDI determination. In conclusion, it is suggested that ECOWAS countries should develop policies that will allow them to use a common currency, develop their human capital, strengthen their balance of payment accounts and develop their investment infrastructure to foster their structural and economic development.