Foreign Direct Investment And Environmental Quality Nexus In West Africa: The Role Of Environmental Policy And Clean Technology

Abstract

This study assessed how clean technology and policy for environmental sustainability mediate the link between between FDI and environmental quality in West Africa. The study used macroeconomic data from 2005 to 2020 from all the West African countries based on available data. The Generalised Method of Moments was used as estimation technique for the study. The findings of the study revealed that foreign direct investment (FDI) enhances environmental quality lending credence to the pollution halo hypothesis in West Africa. Again, the result indicated that both clean technology and environmental policy enhance environmental quality in West Africa. Finally, the net effect calculation provides evidence for the last hypothesis that only environmental policy mediates the link between FDI and environmental quality in West Africa. Thus, while FDI improves environmental quality in West Africa, the effect is more prominent in the presence of environmental policies. The study suggest that environmental policy is necessary when it comes to environmental quality, and as a matter of fact, various West African governments through their environmental protection agencies should institute and implement environmental policies focusing on environmental protection. This policy should aim to direct the activities of corporations receiving foreign direct investment (FDI) towards environmental concerns. Additionally, policymakers and governments should step up efforts to attract FDI to West Africa, while also enforcing environmental regulations in multinational corporations' operations.