Foreign Direct Investment and Economic Performance Nexus in ECOWAS: Does Human Capital Matters?

Abstract

Human capital is an important channel through which foreign investment impact on economic performance and this has either been neglected or not given adequate attention by researchers. This paper therefore examined the nexus between foreign direct investment (FDI) and economic performance of Economic Community of West African States (ECOWAS) considering the imperative of human capital channel. A panel of 13 ECOWAS countries from 1980 to 2018 was utilised in a panel cointegration and autoregressive distributed lag estimation. The results indicated that FDI had a positive effect on economic performance of ECOWAS sub-region in the short run, and the effect became significant in the long run. Findings also revealed that human capital hindered the economic performance effect of FDI in ECOWAS, in the short rum and long run through life expectancy, but with a very weak positive impact through education in both time horizons. The paper recommended, amongst others, that ECOWAS as a body and her member nations should establish and entrench policies that would encourage FDI inflow and promote human capital in the sub-region

Keywords: foreign direct investment, human capital, economic performance, ECOWAS

DOI: 10.7176/RJFA/12-8-07

Publication date: April 30^th 2021