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Foreign Direct Investment in West Africa: Sectoral Evidence on Pollution Haven and Resource Haven Hypotheses Cover

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Foreign Direct Investment in West Africa: Sectoral Evidence on Pollution Haven and Resource Haven Hypotheses

Naše gospodarstvo/Our economy

Volume 72 (2026): Issue 2 (June 2026)

By: Musa Ilias Biala, Animotallahi Yetunde Sanusi and Fatai Akosile

Open Access

|Jun 2026

Abstract

Through a sectoral analysis of foreign direct investment (FDI) in relation to environmental regulation stringency (ERS) and natural resource endowment (NRE), this study investigates the validity of the pollution haven hypothesis (PHH) and resource haven hypothesis (RHH) for West Africa. Drawing on panel data for sixteen West African countries from 2014 to 2024, the study applies a fixed-effects model with Driscoll–Kraay standard errors to evaluate the two hypotheses simultaneously. The results indicated that ERS did not significantly influence aggregate FDI inflows. In contrast, NRE and labour endowment emerged as key drivers of FDI, providing strong support for the RHH. Crucially, the sectoral analysis revealed substantial heterogeneity across industries: FDI in the mining, manufacturing, and petroleum sectors was predominantly resource-seeking, consistent with both the RHH and the PHH, whereas tourism-related FDI declined with greater resource abundance. Furthermore, the positive interaction between ERS and NRE suggests that stricter environmental regulations complement rather than deter resource-driven investment. The study therefore advocates strengthening environmental institutions, enhancing resource governance frameworks, and promoting green investment strategies to foster sustainable development in West Africa.

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Articles in this issue

DOI: https://doi.org/10.2478/ngoe-2026-0008 | Journal eISSN: 2385-8052 | Journal ISSN: 0547-3101

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Language: English

Page range: 10 - 26

Submitted on: May 1, 2026

|

Accepted on: Jun 1, 2026

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Published on: Jun 30, 2026

Published by: University of Maribor

In partnership with: Paradigm Publishing Services

Keywords:

Pollution halo hypothesis,

Resource-seeking FDI,

Driscoll-Kraay standard errors

Related subjects:

Business and economics,

Business management,

Management, organization, corporate governance,

Business and economics,

Political economics,

Economic policy,

Business and economics,

Mathematics and statistics for economists,

© 2026 Musa Ilias Biala, Animotallahi Yetunde Sanusi, Fatai Akosile, published by University of Maribor
This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

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