THE FOREIGN DIRECT INVESTMENT-GOVERNANCE NEXUS: ANOTHER PERSPECTIVE FROM AFRICA

Abstract

This paper examines the impact of governance on foreign direct investment over the period 2005-2019 on a set of 41 sub-Saharan African countries: oil producing countries and non-oil producing countries. Our research shifts from a consolidated evaluation to a differentiated evaluation by implementing the generalized moment method of the framework (GMM). The cumulative strategy consists of the usage of a standardized good governance index that incorporates 6 country policies and institutional assessment tools as governance indices to assess the general effect of governance on FDI inflows. In addition, the incremental methodology explores the effects of the governance indicators on foreign direct investment. The findings suggest that good governance in both oil and non-oil producing countries in the sub-Saharan African region is an essential condition to be considered effectively for the attraction of FDI.