The effect of institutions quality, human capital and infrastructure on FDI and economic growth on the five selected ECOWAS countries

Strong institutions with sound human capital and infrastructure are very significant determinant of foreign direct investment (FDI)inflows and economic growth. Despite various researches on FDI inflows and economic growth, little has been done to examine the effect of human capital, institutions and infrastructure on FDI and economic growth especially on the five Economic Community of West African States (ECOWAS-5). ECOWAS-5 countries are mostly associated with dilapidated infrastructures, low literacy rates, corruption and politically unstable region. The main objective of this research is to study the relationship between human capital, institutions quality and infrastructure on FDI inflows and economic growth of the ECOWAS-5 countries for the period 1990-2015.The variables used in the analysis are gross domestic product, political terror scale, infrastructure, corruption, human capital, trade openness, inflation, real effective exchange rate, gross capital formation including the interactions
of FDI with human capital and political terror scale. Panel data analysis was employed to analyse the relationship between FDI inflows and economic growth. Fully Modified Ordinary Least Square, Pool Mean Group and Dynamic Fixed Effect methods were employed in the estimation process. The results revealed a positive significance effect of human capital to FDI and economic growth.Corruption shows a negative sign to FDI inflows.Theinteraction effect appears to suppress the impact of FDI inflows on economic growth.On the other hand,infrastructure shows a positive relationship with FDI inflows. Therefore, it is suggested that policies must be devised to improve the quality of institutions, upgrade the standard of infrastructures and enhance the quality of human capital in order to attract more FDI inflows and economic growthof ECOWAS-5 countries.