UNEMPLOYMENT AND FOREIGN DIRECT INVESTMENT IN SUB-SAHARAN AFRICA A PANEL REGREESION NON-LINEAR ARDL APPROACH

Abstract

Africa is blessed with both human and natural resources. These resources are the attractions of foreign investors who thrive to reap the gains of these natural endowments. Surprisingly, some of the African countries have low economic development and high unemployment due to their inability to fully harness her natural endowments. The rising rate of unemployment in midst of rising trend of inflow of foreign direct investment in African economy is disturbing especially with the surging level of poverty in the region. The study therefore explored the effect of FDI on unemployment rate in Sub Saharan Africa. This study investigated the short-run and long-run relationship between Foreign Direct investment (FDI) and unemployment in some selected African Countries. The study adopted non linear ARDL panel data analysis and made use of 25 African countries, randomly selected across four regional blocks during a period of 21 years. From the result, FDI was found to have on the average reduced the level of unemployment. One percent increase in foreign direct investment on the average exerts significant effect on unemployment rate in Africa sub region. Specifically, an increase in FDI by one per cent reduces the rate of unemployment by about 0.097 per cent in SSA countries. Education and population have positive and significant influence on the level of unemployment rate in Africa Sub region. Inflation rate which was used as control variable did not exert any significant influence on unemployment. The study therefore recommends that the government should continue to foster enabling fiscal and monetary policies that will attract more foreign direct investments for the purposes of tackling rising unemployment and ginger economic growth. It should also restructure the continent’s academic curriculum that should impart the requisite skills to meet the industry’s demands and suit the employments requirements of the foreign investors.