An Analysis of the Impact of Institutional Factors and Political Volatility on Foreign Direct Investments among ECOWAS Countries

Abstract

West Africa with its mineral and natural resources wealth is considered to be ‘a model for democracy in Sub-Saharan Africa’. In spite of this, the region still remains comparatively under-developmental. In response to this, Fifteen West African states have banded together to form the ECOWAS bloc. The core objectives of this union is upholding peace and encouraging conducive trade and development within this densely populated sub-region of Africa, however the region’s share of FDI flow remains substantial to large scale growth. Many scholars argue that the primary reason why the region has made little headway in increasing the flow of FDI to the region, is found in the individual governance practices as well as the socio-political volatility in these countries. This study examined the relationship between selected governance indicators from the Worldwide Governance Indicator, such as corruption control, government efficiency, political volatility, regulation quality, rule of law and voice and accountability on foreign direct investment among ECOWAS member-states by the use of panel data and trend analysis. From the finding, it was determined that; there exist mixed relationships between FDI inflow and the selected indicators, where; political volatility had a negative insignificant relationship with FDI inflow and regulatory quality has had the most significant positive impact on FDI inflow. The researchers recommend that if ECOWAS states intend to not bear the brunt of global FDI decline, a number of proFDI policies should be implemented.