The Impact of Foreign Direct Investment on Agricultural Trade in Africa: Does Political Stability Matter?

ABSTRACT Promoting intra‐African agricultural trade (ATR) is crucial as far as achievement of the Sustainable Development Goal 2 (SDG 2) (zero hunger) is concerned. Utilizing data from 54 African countries spanning 1996–2021, this article examines the impact of foreign direct investment (FDI) on intra‐ATR, while investigating the relevance of political stability (PS) in this relationship. To achieve this, agricultural exports of selected commodities measured in thousands of dollars are used. Within the framework of the gravity model and utilizing the Poisson pseudo maximum likelihood (PPML) estimation technique, the results reveal that FDI contributes positively to intra‐ATR. Similarly, PS is found to have a significant positive effect on intra‐ATR. However, the interaction term of FDI and PS shows that the latter does not complement the former in promoting intra‐ATR. On the basis of the findings, it is recommended that African governments implement measures to boost FDI across the continent. Doing so would supplement domestic capital, stimulate agricultural production and enhance export capacity. Furthermore, maintaining PS remains essential, as it significantly supports the growth of intra‐ATR.