Exploration of the dynamic interaction between oil, financial development, and foreign direct investment inflows in Africa’s leading oil-producing economies

Abstract

Purpose This study aims to investigate how the oil reserve-to-production (r/p) ratio impacts foreign direct investment (FDI) inflows in Africa’s leading oil-producing economies and how financial development moderates this relationship. Design/methodology/approach The study estimated panel data of the 10-leading oil-producing Africa countries between 2000 and 2022, using pool mean group estimation technique. Findings The study shows that the abundance of oil has a long-run adverse impact on FDI inflows into African oil-producing countries, and that this effect is more pronounced in Sub-Saharan Africa than in North Africa. Furthermore, the importance of a well-developed financial sector for foreign investors is evident only in Sub-Saharan Africa; however, its interaction with oil r/p plays a significant role in mitigating the adverse impact of oil wealth on FDI inflows, particularly in North African countries. Originality/value To the best of the authors’ knowledge, no study has ever considered the oil r/p as a proxy for oil, as it can serve as a valuable measure of oil wealth or availability that can influence FDI inflows. Moreover, most studies on the linkages between oil and FDI flows in Africa focus on comparisons between oil-rich and non-oil-rich countries, with limited comparison among oil-abundant countries or regions themselves, leaving the unique opportunities and challenges of these economies underexplored. Hence, this study focuses on the top 10 African oil-producing economies, by comparing North Africa and Sub-Saharan Africa. In addition, this study innovatively introduced financial development as a moderating variable to provide insight into the dynamic interaction between oil, and FDI inflows in Africa.

The authors' abstract, as published at the source. Journal of Financial Economic Policy, 2026 · DOI ↗