FOREIGN DIRECT INVESTMENT AND AGRICULTURAL GROWTH IN ECOWAS COUNTRIES: 1970-2022

Abstract

This study examined foreign direct investment and agricultural growth in ECOWAS between 1970 and 2022, and employed panel data estimators such as the panel two steps system generalised method of moments (GMM) regression technique under the random effect assumption to investigate the impact of foreign direct investment and agricultural growth in ECOWAS. The Results of the study revealed that foreign direct investment in agriculture (FDIA) had negative and statistically significant impact on agricultural gross domestic product (GDPA) with a coefficient of -2.5647 (and p-value of 0.0265). This means that a 1-unit increase in lagged FDIA was associated with a 2.56-unit reduction in GDPA. This implies that FDI had adverse effects, possibly due to inefficient allocation, dependence on foreign capital, or crowding out of domestic investment, on GDPA across ECOWAS, between 1970 and 2022. The significance (p = 0.0265) suggests this relationship was not due to random chance. The small and statistically insignificant coefficient of labour force (LEF) implies that it did not significantly influence GDPA in the ECOWAS region. This result (p = 0.6487) suggests that variations in the labour force did not have a measurable shortterm effect on GDPA, which might be explained by low productivity or underemployment in some cross-sections. Based on the findings, the study recommended that Policymakers across ECOWAS should review the allocation of FDI in agriculture by encouraging domestic investment in agriculture and providing incentives such as tax holiday, subsidies, and access to credit. Also, ECOWAS governments should invest in training programmes to improve the skills of agricultural workers which will increase labour productivity in agriculture. Mechanisation and the adoption of modern agricultural practices should also be prioritised to optimise labour efficiency.