A Comparative Assessment of the Contribution of Foreign Direct Investment to Economic Development of Nigeria and Ghana

Abstract

Generally, sub-Saharan countries suffer setbacks in regard to capital accumulation necessary to sponsor investment demands, thus promoting economic development. As a result, they look out for foreign sources such as foreign direct investment (FDI) to augment the investment-saving gap. Recently, due to global shake-ups and uncertainty, there has been a drastic fluctuation in the level of FDI inflow into the West African sub-region, especially in the two giant economies of Nigeria and Ghana. This attracted the attention of this research work. Thus, this study comparatively reassesses the contribution of FDI inflow to the economic development of these giant economies from 1980 to 2020 to determine which one of them benefits the most given the fluctuation in FDI inflows. The outcome reveals that FDI inflows have a significant influence on the economic development of both economies. In Nigeria particularly, evidence shows a strong positive correlation between FDI and Gross Domestic Product Per Capita (GDPPC), implying that the Nigerian economy is investment-driven in the period under consideration. Essentially, the Nigerian economy can achieve its desired development with FDI support. Similarly, findings indicate that FDI inflows into Ghana have a strong positive impact on economic development. Thus, a recommendation is made for the Ghanaian government to source more foreign resources by opening her economic borders wide for global integration. Pursuance of trade liberation policy for the purpose of attracting more foreign resources is critical to the attainment of sustainable economic development in both economies. Policy actions enabling stable macroeconomic conditions and a peaceful environment for smooth investment operations are key factors guaranteeing economic development.