IMPACT OF FOREIGN AID AND INSTITUTIONAL QUALITY ON POVERTY IN SUB – SAHARAN AFRICAN COUNTRIES

Abstract

The purpose of this study is to examine the impact of foreign aid on foreign direct investment nexus in Sub-Saharan African countries. The system generalized method of moment is applied on 33 countries covering the period of 2002 to 2020. The study reveals that official development assistance (0.012) is positive and statistically significant on poverty rate proxy by household final consumption expenditure in the Sub-Saharan African (SSA) region. Again, the study discovered a non-linear relationship between official development assistance and poverty rate. The rest of the study reveal that interaction term of institutional quality and official development assistance is positive and statistically significant on poverty rate proxy by household final consumption expenditure. The endogenous variables of institutional quality and Gross Domestic Product are positive and statistically significant on poverty rate in the SSA region The study concludes that foreign aid and institutional quality significantly impacted positively on poverty rate proxied by households' final consumption expenditure in SSA countries. Based on the findings, it is suggested that, Sub-Saharan African countries should use the fund received from foreign aid to empower their populace in order to make them selfsustainable. They can achieve this through building institutions that will train masses on selfemployment.