ABSTRACT
The study assessed the effect of fiscal policy on net foreign direct investment (FDI) inflows, economic growth and development in sub-Saharan African economies from 1985 to 2019. Fiscal policy was proxied by government capital expenditure, government recurrent expenditure and tax revenue. Data were collected from World Development Indicators (2019) and Central Bank of Nigeria (CBN) Statistical Bulletin (2019). In all the models of the study, the unit root test showed that the variables were integrated of order one (i.e. I(1)) and the Johansen cointegration test showed that there was long run equilibrium relationship among the variables. Thereafter, vector error correction mechanism (VECM) technique was employed in determining the country-by-country effect of fiscal policy on net FDI, economic growth and economic development while pooled effect Ordinary Least Squares (POLS) was employed to determine the aggregate effect. Findings revealed that government capital expenditure had positive and significant effect on net FDI inflows and economic growth in sub-Saharan African economies (p < 0.05). Conversely, the study showed that government recurrent expenditure had negative and significant effect on net FDI inflows and economic growth (p < 0.05). The study also showed that government recurrent expenditure had positive and significant effect on economic development (p < 0.05). Furthermore, the study showed that tax revenue had positive and insignificant effect on economic growth (p > 0.05) while it positively and significantly increased economic development in sub-Saharan African economies (p < 0.05). However, tax revenue had negative and insignificant effect on net foreign investment (FDI) inflows in sub-Saharan African economies (p > 0.05). In conclusion, the study found that fiscal policy of governments in sub-Saharan African economies significantly affected net FDI inflows, economic growth and development. The study recommended that government capital expenditure should be increased across sub-Saharan African economies especially in Nigeria, Cameroun and Ghana in order to attract more foreign direct investment.
TABLE OF
CONTENTS
Title Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgements v
Table of Contents vi
List of Tables x
List of Figures xiii
Abstract xiv
CHAPTER 1: INTRODUCTION 1
1.1 Background
to the Study 1
1.2 Statement
of the Problem 7
1.3 Objectives
of the Study 10
1.4 Research
Questions 10
1.5 Research
Hypotheses 11
1.6 Significance
of the Study 11
1.7 Scope
of the Study 12
1.8 Operational
Definition of Terms 12
CHAPTER
2: REVIEW OF RELATED LITERATURE 14
2.1 Conceptual Framework 14
2.2 Trends In Selected Fiscal Policy, FDI and
Economic Growth Indicators
In
Sub-Saharan African Countries: Nigeria, Cameroun,
Ghana and
Gambia Perspective 20
2.2.1 Trend in government expenditure in Nigeria,
Cameroun, Ghana and
Gambia: a comparison 20
2.2.2 Trends in government expenditure in selected
Sub-Saharan
African Countries 22
2.2.3 Trends in economic growth rate in Nigeria,
Cameroun, Ghana and
Gambia:
a comparison 24
2.2.4 Trends in FDI Inflow (% of GDP) in Nigeria,
Cameroun, Ghana and
Gambia:
a Comparison 27
2.3 Theoretical Review 29
2.3.1 Managerial theory 29
2.3.2 Savers-spenders
theory 30
2.3.3 Marginal
efficiency theory 31
2.3.4 Efficient frontier theory 32
2.3.5 The
Keynesian theory of government expenditure/economic growth 33
2.3.6 Neo-classical
theory/exogenous growth theory 36
2.3.7 Endogenous growth theory 38
2.4 Empirical
Literature 39
2.5 Summary
of Review of Literature 61
2.6 Gap
in Literature 64
CHAPTER 3: METHODOLOGY 65
3.1 Research
Design 65
3.2 Area
of Study 66
3.3 Sources
of Data 67
3.4 Model
Specification 67
3.5 Measurement
of the Variables 73
3.6 Method
for Data Analysis 75
3.6.1 Unit root test 71
3.6.2 Cointegration test 76
3.6.3 Autoregressive distributed lag (ARDL)/error
correction
modeling (ECM)
technique 77
3.6.3.1 t-statistic 78
3.6.3.2 F-statistic 78
3.6.3.3 R-squared 79
3.6.3.4 Durbin-Watson statistic 79
CHAPTER
4: DATA ANALYSIS AND DISCUSSION OF FINDINGS 80
4.1 Data
Analysis 80
4.1.1 Nigeria 80
4.1.1.1 Lag order selection criteria 80
4.1.1.2 Unit root test 83
4.1.1.3 Cointegration test 83
4.1.1.4 Vector error correction
model (VECM) Results 87
4.1.2 Cameroun 97
4.1.2.1 Lag order selection
criteria 97
4.1.2.2 Unit root test 100
4.1.2.3 Cointegration test 101
4.1.2.4 Vector error correction
model (VECM) results 104
4.1.3 Ghana 114
4.1.3.1 Lag order selection
criteria 114
4.1.3.2 Unit root test 116
4.1.3.3 Cointegration test 117
4.1.3.4 Vector error correction
model (VECM) results 120
4.1.4 Gambia 130
4.1.4.1 Lag order selection
criteria 130
4.1.4.2 Unit root test 132
4.1.4.3 Cointegration test 133
4.1.4.4 Vector Error Correction
Model (VECM) Results 136
4.1.5.1 Pooled-effect Regression
Results 145
4.2 Test
of Hypotheses 152
4.3 Discussion
of Findings 153
4.3.1 Effect
of government capital expenditure on net FDI inflows,
economic growth and development 153
4.3.2 Effect of government recurrent expenditure on
Net FDI Inflows,
Economic Growth and Development 155
4.3.3 Effect of tax revenue on FDI inflows, economic
growth and development 156
CHAPTER
5: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS 158
5.1 Summary
of Findings 158
5.2 Conclusion 159
5.3 Recommendations 160
REFERENCES 162
APPENDICES 170
LIST OF TABLES
2.1: Data on General Government Final
Consumption Expenditure
in Nigeria, Cameroun, Ghana
and Gambia (1980-2017) 20
2.2: Data on Gross Domestic Product Growth Rate
in Nigeria, Cameroun,
Ghana and Gambia (1980-2017) 24
2.3: Data on FDI, Net Inflow (% of GDP) in
Nigeria, Cameroun, Ghana
and
Gambia 27
2.4: Summary
of Literature Review 61
1a: Optimal
Lag Selection Criteria (FDI Model) 80
2a: Optimal
Lag Selection Criteria (GDP Model) 81
3a: Optimal
Lag Selection Criteria (GDPPC Model) 82
4a: Augmented
Dickey-Fuller (ADF) Unit Root Test Result 83
5a: Johansen
Cointegration Test Result for FDI Model 84
6a: Johansen
Cointegration Test Result for GDP Model 85
7a: Johansen
Cointegration Test Result for GDPPC Model 86
8a: Vector
Error Correction Modeling (VECM) Result for FDI Model 87
9a: Vector
Error Correction Model (VECM) Result for FDI Model 89
10a: Vector
Error Correction Modeling (VECM) Result for GDP Model 90
11a: Vector
Error Correction Model (VECM) Result for GDP Model 92
12a: Vector
Error Correction Modeling (VECM) Result for GDPPC Model 94
13a: Vector
Error Correction Model (VECM) Result for GDPPC Model 96
1b: Optimal
Lag Selection Criteria (FDI Model) 97
2b: Optimal
Lag Selection Criteria (GDP Model) 98
3b: Optimal
Lag Selection Criteria (GDPPC Model) 99
4b: Augmented
Dickey-Fuller (ADF) Unit Root Test Result 100
5b: Johansen
Cointegration Test Result for FDI Model 101
6b: Johansen
Cointegration Test Result for GDP Model 102
7b: Johansen
Cointegration Test Result for GDPPC Model 103
8b: Vector
Error Correction Modeling (VECM) Result for FDI Model 104
9b: Vector
Error Correction Model (VECM) Result for FDI Model 106
10b Vector
Error Correction Modeling (VECM) Result for GDP Model 107
11b: Vector
Error Correction Model (VECM) Result for GDP Model 109
12b: Vector
Error Correction Modeling (VECM) Result for GDPPC Model 110
13b: Vector
Error Correction Model (VECM) Result for GDPPC Model 112
1c: Optimal
Lag Selection Criteria (FDI Model) 114
2c: Optimal
Lag Selection Criteria (GDP Model) 114
3c: Optimal
Lag Selection Criteria (GDPPC Model) 115
4c: Augmented
Dickey-Fuller (ADF) Unit Root Test Result 116
5c: Johansen
Cointegration Test Result for FDI Model 117
6c: Johansen
Cointegration Test Result for GDP Model 118
7c: Johansen
Cointegration Test Result for GDPPC Model 119
8c: Vector
Error Correction Modeling (VECM) Result for FDI Model 120
9c: Vector
Error Correction Model (VECM) Result for FDI Model 122
10c: Vector
Error Correction Modeling (VECM) Result for GDP Model 123
11c: Vector
Error Correction Model (VECM) Result for GDP Model 125
12c: Vector
Error Correction Modeling (VECM) Result for GDPPC Model 127
13c: Vector
Error Correction Model (VECM) Result for GDPPC Model 129
1d: Optimal
Lag Selection Criteria (FDI Model) 130
2d: Optimal
Lag Selection Criteria (GDP Model) 131
3d: Optimal
Lag Selection Criteria (GDPPC Model 131
4d: Augmented
Dickey-Fuller (ADF) Unit Root Test Result 132
5d: Johansen
Cointegration Test Result for FDI Model 133
6d: Johansen
Cointegration Test Result for GDP Model 134
7d: Johansen
Cointegration Test Result for GDPPC Model 135
8d: Vector
Error Correction Modeling (VECM) Result for FDI Model 136
9d: Vector
Error Correction Model (VECM) Result for FDI Model 138
10d: Vector
Error Correction Modeling (VECM) Result for GDP Model 139
11d: Vector
Error Correction Model (VECM) Result for GDP Model 141
12d: Vector
Error Correction Modeling (VECM) Result for GDPPC Model 142
13d: Vector
Error Correction Model (VECM) Result for GDPPC Model 144
14a: Pooled-effect
Ordinary Least Squares Result for FDI Model 146
14b: Pooled-effect
Ordinary Least Squares Result for GDP Model 148
14c: Pooled-effect
Ordinary Least Squares Result for GDPPC Model 150
LIST OF FIGURES
2.1: General
Government Final Consumption Expenditure 22
2.2: Trends in Economic Growth in Nigeria,
Cameroun, Ghana and Gambia 25
2.3: Trends in Net FDI Inflow (% of GDP) in
Nigeria, Cameroun,
Ghana
and Gambia 28
CHIOMA, P (2023). Effects Of Fiscal Policy On Foreign Direct Investment, Economic Growth And Development In Sub-Saharan African Economies.. Mouau.afribary.org: Retrieved Dec 23, 2024, from https://repository.mouau.edu.ng/work/view/effects-of-fiscal-policy-on-foreign-direct-investment-economic-growth-and-development-in-sub-saharan-african-economies-7-2
PATIENCE, CHIOMA. "Effects Of Fiscal Policy On Foreign Direct Investment, Economic Growth And Development In Sub-Saharan African Economies." Mouau.afribary.org. Mouau.afribary.org, 15 Aug. 2023, https://repository.mouau.edu.ng/work/view/effects-of-fiscal-policy-on-foreign-direct-investment-economic-growth-and-development-in-sub-saharan-african-economies-7-2. Accessed 23 Dec. 2024.
PATIENCE, CHIOMA. "Effects Of Fiscal Policy On Foreign Direct Investment, Economic Growth And Development In Sub-Saharan African Economies.". Mouau.afribary.org, Mouau.afribary.org, 15 Aug. 2023. Web. 23 Dec. 2024. < https://repository.mouau.edu.ng/work/view/effects-of-fiscal-policy-on-foreign-direct-investment-economic-growth-and-development-in-sub-saharan-african-economies-7-2 >.
PATIENCE, CHIOMA. "Effects Of Fiscal Policy On Foreign Direct Investment, Economic Growth And Development In Sub-Saharan African Economies." Mouau.afribary.org (2023). Accessed 23 Dec. 2024. https://repository.mouau.edu.ng/work/view/effects-of-fiscal-policy-on-foreign-direct-investment-economic-growth-and-development-in-sub-saharan-african-economies-7-2