Investment and Economic Growth: Panel Evidence from Selected West African Countries

Abstract

This study investigated the effect of investment on economic growth: panel evidence from selected West African countries. The period of study covered 1990 – 2024. The dependent variable was gross domestic product while domestic investment, inward foreign direct investment, outward foreign direct investment and insecurity index were the independent variables. The data were sourced from the World Development Indicator and Central Banks of the respective countries. The selected West African countries in focus included Nigeria, Ghana, Liberia, The Gambia and Sierra Leone. Panel random effect model was used in analysing the data. The result obtained revealed that domestic investment increased economic growth of the selected countries significantly while FDI inflow and insecurity index exerted negative effects on economic growth of the selected countries. However, outward flow of foreign direct investment showed positive but insignificant effect on economic growth of the of the countries of interest. The study concluded that domestic investments in the selected countries have been appreciable and has increased the economy of the countries but foreign direct investment inflow and outflow have not had the desired effect on growth of the countries’ economies. Insecurity remained a problem for FDI inflows and outwards in the region. It was recommended that governments in the West African region should make their domestic economies attractive to foreign investors by improving common infrastructure, accelerating industrialization and leveraging on regional trade agreements in order to facilitate cross-border investments.