Effect of foreign direct investment on environmental quality in West Africa

Foreign direct investment (FDI) is known to be beneficial because of the positive externalities it generates in the recipient economy, whether in developed or developing countries. With a view to achieving the Sustainable Development Goals (SDGs), West African countries are investing in attracting foreign investors, as evidenced by the upsurge in FDI flows observed over the past two decades and the reforms and attractiveness policies put in place. In West Africa, this FDI, which is mainly directed towards the natural resource extraction sectors, has consequences for the quality of the environment. This paper focuses on analyzing the effect of FDI on environmental quality in 13 West African countries over the period 2000-2020. This research uses a panel quantile regression with nonadditive fixed effect. The main results obtained indicate a negative effect of FDI on environmental quality reflecting the existence of the pollution haven hypothesis in the area. In addition, we find evidence of the U shape of the environmental Kuznets curve (EKC), invalidating the environmental Kuznets curve (EKC) hypothesis. West African governments should implement green investment and financing strategies and encourage the use of new green technologies and clean energy to improve environmental quality.