Institutional Quality, Foreign Direct Investment, Inflation and Economic Growth in Sub-Saharan Africa

Öz

The paper examines how the inflation, institutional quality and foreign direct investment influence the economic growth of six chosen Sub-Saharan African economies namely Nigeria, Ghana, Kenya, Tanzania, South Africa, and Zimbabwe, between the years 1996 and 2023. Panel data analysis using fixed effects and random effects models is used in the study to investigate how indicators of governance namely government effectiveness, rule of law, and regulatory quality together with FDI inflows and inflation affect the annual GDP growth. The Hausman test provides support to the fact that the fixed effects model can be reliably estimated. The results show that economic growth is positively related to the rule of law and the quality of regulations though their impacts are weak usually in the short term. The negative influence of government effectiveness occurs under some specifications, which indicate the problems with the implementation of the policies and delivery of the public services. FDI has a positive, but statistically insignificant effect showing that investment can never lead to growth without other forms of institutional and macroeconomic reforms. The impact of inflation on growth is very devastating, hence the need to ensure price stability. The research overcomes that governance and institutional quality are essential to spur economic growth in Sub-Saharan Africa, although their effects are generally indirect and dependent on other more structural and macroeconomic determinants. According to the findings, the study proposes institutional reinforcements, enhancements in government effectiveness, attracting FDI by enabling policies and sustaining macroeconomic stability to achieve sustainable regional economic growth.

Anahtar Kelimeler

• Foreign Direct Investment
• Governance
• Sub-Saharan Africa

Kurumsal Kalite, Doğrudan Yabancı Yatırımlar, Enflasyon ve Sahra Altı Afrika’da Ekonomik Büyüme

Öz

Bu makale, 1996-2023 yılları arasında seçilmiş altı Sahra Altı Afrika ekonomisi olan Nijerya, Gana, Kenya, Tanzanya, Güney Afrika ve Zimbabve’de enflasyon, kurumsal kalite ve doğrudan yabancı yatırımın ekonomik büyüme üzerindeki etkilerini incelemektedir. Araştırmada, yönetişim göstergeleri olan hükümet etkinliği, hukuk devleti ve düzenleyici kalite ile DYY girişleri ve enflasyonun yıllık GSYİH büyümesini nasıl etkilediğini araştırmak için panel veri analizi, sabit etkiler ve rastgele etkiler modelleri kullanılmıştır. Hausman testi, sabit etkiler modelinin güvenilir bir şekilde tahmin edilebileceğini desteklemektedir. Sonuçlar, ekonomik büyümenin hukuk devleti ve düzenlemelerin kalitesi ile pozitif ilişkili olduğunu göstermekte, ancak bu etkiler genellikle kısa vadede zayıftır. Hükümet etkinliğinin olumsuz etkisi bazı model spesifikasyonlarında gözlenmiş olup, bu durum politika uygulamaları ve kamu hizmetlerinin sunumundaki sorunları göstermektedir. DYY’nin etkisi pozitif olmasına rağmen istatistiksel olarak anlamlı değildir; bu durum, yatırımın tek başına büyümeyi sağlayamayacağını, bunun için kurumsal ve makroekonomik reformların gerekli olduğunu ortaya koymaktadır. Enflasyonun büyüme üzerindeki etkisi oldukça yıkıcıdır; bu nedenle fiyat istikrarının sağlanması gerekmektedir. Araştırma, yönetişim ve kurumsal kalitenin Sahra Altı Afrika’da ekonomik büyümeyi teşvik etmek için temel olduğunu, ancak etkilerinin genellikle dolaylı ve diğer yapısal ve makroekonomik belirleyicilere bağlı olduğunu ortaya koymaktadır. Bulgulara dayanarak, çalışma sürdürülebilir bölgesel ekonomik büyüme için kurumsal güçlendirmeler, hükümet etkinliğinin artırılması, DYY çekici politikaların uygulanması ve makroekonomik istikrarın sürdürülmesini önermektedir.

Anahtar Kelimeler

• Doğrudan Yabancı Yatırım
• Yönetişim
• Sahra Altı Afrika

Kaynakça

1. Acemoglu, D., Johnson, S., & Robinson, J. A. (2001). The colonial origins of comparative development: An empirical investigation. American Economic Review, 91(5), 1369–1401. https://www.aeaweb.org/articles?id=10.1257/aer.91.5.1369
2. Adegboye, F. B., Osabohien, R., Olokoyo, F. O., Matthew, O., & Adediran, O. (2020). Institutional quality, foreign direct investment, and economic development in sub-Saharan Africa. Humanities and social sciences communications, 7(1), 1-9.
3. Adewale, A. (2025). Effect Of Foreign Direct Investment (FDI) On Nigeria’s Economic Growth. Airlangga Journal of Innovation Management, 6(4), 839–858. https://doi.org/10.20473/ajim.v6i4.78838
4. Adewale, A. A. (2025). Effect Of Monetary Policy Rates and Inflation on The Nigerian Exchange Group (NGX). Kerbala International Journal of Management and Economics, 13(48), 13–26. https://doi.org/10.63540/kijme.v13i48.3656
5. Adewale, A. A., & Nedelea, A. M. (2025). How Do Exchange Rate Dynamics Shape International Tourism Demand? Revista De Turism - Studii și cercetări în Turism, (40). https://doi.org/10.4316/rdt.40.3020
6. Adewale, A.A. (2025). Effects Of Budget Deficit and Money Supply on Inflation in Nigeria. Business Excellence & Management, 15(3), 21-39. https://doi.org/10.24818/beman/2025.15.3-02
7. Afolabi, J. A., & Raifu, I. A. (2025). Toward economic resilience in Sub‐Saharan Africa: The role of institutional quality and human capital development. Sustainable Development, 33(2), 2566-2578.
8. Alfaro, L., Chanda, A., Kalemli-Ozcan, S., & Sayek, S. (2004). FDI and economic growth: The role of local financial markets. Journal of International Economics, 64(1), 89–112. https://doi.org/10.1016/S0022-1996(03)00081-3

9. Appiah, M., Onifade, S. T., & Gyamfi, B. A. (2025). Pathways to sustainability in sub-Sahara Africa: Are institutional quality levels subservient in achieving green GDP growth?. Journal of the Knowledge Economy, 16(1), 2366-2390.
10. Bangura, A. I. (2026). Exploring the Relationship Between Government Spending and Economic Growth in Sierra Leone from 2007 to 2022. Journal of Scientific Reports, 12(1), 105-119.
11. Beyene, A. B. (2024). Governance quality and economic growth in Sub-Saharan Africa: the dynamic panel model. Journal of Economic and Administrative Sciences, 40(2), 404-418.
12. Grabowski, R., & Self, S. (2021). Determinants of governance institutional quality in sub-Saharan Africa. Applied Economics, 53(18), 2066-2079.
13. Kamara, A. K. (2026). The impact of Foreign Direct Investment and Trade on Economic Growth: Evidence from sub-Saharan Africa. Journal of Market Research, 1(1), 1-16.
14. Köse, T. (2025). The Unemployment Hysteresis Puzzle: A Bibliometric Analysis of Global Research Patterns. Gaziantep Üniversitesi Sosyal Bilimler Dergisi, 24(4), 1672-1689.
15. Kunawotor, M., Ahiabor, G., & Yobo, E. (2025). Government size, institutional quality and economic welfare in Africa. International Journal of Social Economics, 52(4), 578-590.
16. Liu, M., Lu, J., Liu, Q., Wang, H., Yang, Y., & Fang, S. (2025). The impact of executive cognitive characteristics on a firm’s ESG performance: an institutional theory perspective. Journal of Management and Governance, 29(1), 145-173.
17. Meniago, C., Mazorodze, B. T., & Mah, G. (2025). Linking financial development and economic growth: do we have new evidence of the role of institutions in CFA countries?. Cogent Economics & Finance, 13(1), 2460067.
18. Mithani, M. A. (2023). Scaling digital and non-digital business models in foreign markets: The case of financial advice industry in the United States. Journal of World Business, 58(4), 101457.
19. North, D. C. (1990). Institutions, Institutional Change and Economic Performance. Cambridge University Press.
20. Ofori, I. K., & Asongu, S. (2021). Foreign direct investment, governance and inclusive growth in sub-Saharan Africa. Governance and Inclusive Growth in Sub-Saharan Africa (June 7, 2021).
21. Okere, W., & Ambe, C. (2026). Financing Green Transitions: The Institutional Link in Sub-Saharan Africa’s Renewable Energy Drive. International Journal of Energy Economics and Policy, 16(1), 798-805.
22. Ozekhome, H. O. (2022). Do regulatory quality, government effectiveness and rule of law matter to foreign direct investment in Nigeria. Romanian Journal of Economic Forecasting, 25(1), 160-175.
23. Senu, O. (2020). A critical assessment of anti‐corruption strategies for economic development in sub‐Saharan Africa. Development Policy Review, 38(5), 664-681.
24. Shittu, S. A., Adewale, A. A., & Agyemang, J. K. (2025). How Monetary Policy and Macroeconomic Instability Influence Foreign Direct Investment? Journal of Accounting and Finance in Emerging Economies, 11(3). https://doi.org/10.26710/jafee.v11i3.3504
25. Ugwu, J. I., & Okoye, E. I. (2018). Accounting for the effect of foreign direct investment on economic growth, post IFRS adoption in selected Sub-Saharan African countries (1999-2015). International Journal of Academic Research in Accounting, Finance and Management Sciences, 8(2), 73-94.
26. World Bank. (2024). World development indicators. https://databank.worldbank.org/source/world-development-indicators
27. World Bank. (2024). Worldwide governance indicators. https://info.worldbank.org/governance/wgi/
28. Younas, M. Z. (2026). Fueling firm productivity: the role of institutional quality and innovation in a developing economy. Economics of Innovation and New Technology, 35(1), 155-182.