Does Foreign Capital Fuel Corruption? Insights from Sub-Saharan African Countries

By: Okon Edidiong Amos, Philip C. Omoke

Pages: 179–203, Volume: 3, Number: 1

Published by: AEFUNAI Journal of Economics, Finance and Development Studies, Alex Ekwueme Federal University, Ndufu-Alike, 2/1/2026, 2026

ISSN (Electronic): 2536-6742

DOI:

Does Foreign Capital Fuel Corruption? Insights from Sub-Saharan African Countries

Abstract:

Foreign capital is considered important in augmenting domestic capital and investments, promoting technology transfer, building institutions to check corruption, and ultimately accelerating economic growth. However, the motives of the donor and recipient may not align; understanding how foreign capital affects corruption in Sub-Saharan Africa has profound implications for advancing the African Union’s Agenda 2063 and the 2030 Agenda for Sustainable Development Goals in Africa. In this study, we re-investigate the effect of foreign capital on corruption in 27 Sub-Saharan African countries from 2005 to 2023. Using the System Generalized Method of Moments (GMM), the results show that while foreign direct investment (FDI) can reduce corruption by introducing better institutional practices, foreign aid often exacerbates it due to weak oversight. The study suggests strengthening anti-corruption frameworks to ensure foreign capital benefits development.

Keywords: Foreign capital, Corruption, Economic growth, Sub-Saharan Africa, Institutional quality