SUSTAINABLE ENERGY SUPPLY, INSTITUTIONAL QUALITY AND FOREIGFN DIRECT INVESTMENT IN WEST AFRICA

Abstract

Foreign direct investment (FDI), is regarded as one of the most important contributors of economic growth. However, West Africa is one of the most corrupt of any region in the world which affect the inflows of foreign direct investment into the region. Hence, the study examined the impact of sustainable energy supply, institutional quality and foreign direct investment in West Africa. The study sampled the entire West African countries. Secondary data was employed sourced from the World Development Indicator covering the period of 2000 to 2021. The study employed dynamic panel Generalized Method of Moments (GMM) estimator, cross-sectional auto-regressive distributed regression (ARDL) and Dumitrescu and Hurlin Panel Causality Tests. The findings from the study showed that access to electricity (β = 2.0311; p < 0.01) have a positive influence on foreign direct investment. The study also revealed that electricity production (β = .7028; p < 0.01) have significant impact on foreign direct investment. The study further revealed that rule of law (β = 3.450; p < 0.01) is a significant determinant of foreign direct investment. It was also revealed that: control of corruption (β =.0998; p < 0.01) has significant impact on foreign direct investment. Finally, the study revealed that electricity production and foreign direct investment had uni-directional causality. The study concluded that energy supply and institutional quality have impact on foreign direct investment to West African countries. The study recommended that governments of various nations in West Africa countries should improve on the level of investment in the energy sector as energy supply is seen as a major cause of having low attraction of foreign direct investment in the region. In addition, government should strengthen the quality of their institutions such as the rule of law, political stability, control of corruption, government effectiveness, and voice and accountability, thereby reducing the risk of foreign investors and increase the level of foreign direct investment in West Africa.