THE INFLUENCE OF FOREIGN CAPITAL ON ECONOMIC GROWTH IN AFRICA

Abstract

This study explores the influence of foreign capital on economic growth in Africa's ten largest economies from 1994 to 2023. Using the Feasible Generalized Least Squares (FGLS) estimation technique, the analysis assesses the influence of three key external financial sources: Foreign Direct Investment (FDI), Official Development Assistance (ODA), and Remittances on economic growth, measured by Gross Domestic Product per Capita (GDP per capita). The findings reveal that FDI significantly positively affects economic growth, underscoring its role in capital accumulation, technology transfer, and productivity enhancement. Conversely, ODA demonstrates a negative impact, suggesting inefficiencies in aid utilisation or potential dependency effects. On the other hand, remittances contribute positively to economic growth, highlighting their role in household income support and investment. These results provide crucial policy implications for African economies, emphasising the need to attract FDI, optimise aid effectiveness, and harness remittances to foster sustainable economic growth.