Do Violent Extremism Impact Foreign Direct Investments in the Lake Chad Basin Countries?

IseOlorunkanmi, Ojo Joseph and Rotimi, Mathew E. and Ahmed, Ayodele Victor (2023) Do Violent Extremism Impact Foreign Direct Investments in the Lake Chad Basin Countries? Saudi Journal of Humanities and Social Sciences, 8 (7). ISSN 2415-6248 (In Press)

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Abstract

The paper examined how foreign direct investment (FDI) responded to violent extremism in Lake Chad Basin Countries (LCBCs). The LCBCs are those countries that are situated within the Lake Chad area. Based on the selected countries’ distinctive characteristics, such as small, open, and developing economies, the study pooled time series and cross-sectional data within the Panel Structural Vector Autoregressive (P-SVAR) model framework, to examine how FDI responded to terrorism in LCBCs. The data for this study were sourced from the World Bank’s and World Development Indicators (WDI) dataset, and the data are sampled at the same frequency, following Kalman filter technique. The data was analyzed through thematic literature reviewed using e-views. The findings of the study were presented in a scientific report for examination. Firstly, the study investigated the extent to which the inflow of FDI is determined by the level of political or institutional quality. Secondly, the study used a panel VAR model in a dataset of the LCBCs spanning 2000 to 2019 to explore the extent to which violent extremism in the form of terrorism affected FDI. The results showed a mixture of positive and negative shocks. Furthermore, the findings reveal that FDI significantly responds to terrorism. It argues that higher level of terrorism impedes FDI. The findings also reveal that terrorism increased military expenditure. Thus, the study shows that there is a significant positive relationship between terrorism and military expenditure. Consequently, the study recommended that the LCBCs region should guide against terrorism and be conscious of its occurrence to attract FDI to improve economic growth and the general wellbeing of the region.

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