Foreign Direct Investment Flow to Africa: Does Natural Resources Matter？

Abstract

In this study, it explored connections between FDI inflows and natural resource. The paper is an effort to investigate a sample of 10 most resourced sub-Sahara African countries and examine the influence of natural resources on FDI inflow. Further, natural resource wealth is reflected to weaken the FDI inflow. This study discovers if the natural resource overflow affects the FDI inflows. By means of panel data for a sample dated 1990-2017, the paper employed fixed effects method and settles that natural resource slows down FDI inflow of the host nation. The results indicate that economic growth, labor force, trade openness and financial development framework promote FDI inflow in Sub-Sahara Africa countries. The study proposes that FDI inflow to SSA is not only driven by the availability of natural resources in a country but by some exogenous factors, countries with non-existence of natural resources and can obtain FDI by cultivating their bodies and policy environment. Second, multifaceted organizations like the IMF and the World Bank can play a significant role in assisting FDI by encouraging good organisations in SSA.