Foreign Direct Investment and Economic Development in Low Income African Countries

Low income economies are characterized with high investment returns and therefore should attract foreign investment to primarily fill the existing gaps of productive factors which vividly reveals the basis for their underdeveloped status. The main objective of the study is to ascertain the impact of flow of FDI on the economic development of the host African countries characterized with low income per capita. Panel data were utilized for 39 African countries, 20 of which were low income countries. The results indicates that FDI had significant impact on the economic development of the host African countries, by enhancing the development of the host sector and reducing gradually dependence on foreign capital, which resulted in increased income per capita, better education, living standards and the wellbeing of the host economies. The study concludes by recommending that government of the host economies should guide the sector of FDI inflow, and ensure that policies are in place to enhance domestic investment development in such sectors. This will gradually bring about the closure of existing proactive factors and hence economic development