Private capital inflows and industrial sector performance: a comparative study of the top largest economies in Sub-Saharan Africa

This paper investigates the interactive effect of foreign direct investment and foreign portfolio investment on industrial performance, with the aim of validating or refuting the Bank for International Settlements (BIS) position on the risk posed by large fluctuations in private capital flows. The investigation focuses on the top largest economies in Sub-Saharan Africa, and covers the period 1990-2021. The methodologies of dynamic ordinary least squares model and unrestricted error correction model are employed in the investigation. The results reveal that the interaction between foreign direct investment and foreign portfolio investment did not have impressive effect on industrial growth, compared to capital market and trade openness with relatively high impact. It follows that fluctuations in private capital inflows constitute a major challenge to industrial performance. Since private capital inflows failed to facilitate industrial performance, it is necessary to fill the vacuum by raising the level of domestic private investments.