Official development assistance, volatility and per capita real gdp growth in sub-Saharan African countries: a comparative regional analysis

The issue of poor economic performance and growth of sub-Saharan African economies have become so worrisome and this has called for a wide range of research and experts argued in favor of official development assistance as an important catalyst for growth in salvaging the sub-Saharan African economies. Available statistics showed that there has been surge in official development assistance flow into Africa. Specifically, the statistics show that Sub-Saharan Africa has received more official development assistance than any other region reaching 10 times and 15 times of inflow to transition and developed economies respectively over the years. Despite this flow of ODA, sub-Saharan African economies have always witnessed dwindling economic performance. Experts opined that poor economic policies, diversion of official development assistance to unproductive consumption and volatility of aid have been responsible for the ineffectiveness of aid to salvage recipient countries. This study therefore sets out to examine the effectiveness of official development assistance on per capita GDP growth for the different regions in Sub-Sahara Africa. The study first undertakes to establish the existence of official development assistance volatility in the selected countries and examines its effect on per capita growth and as well accounting for policy environment as a channel to the link. The study covers the period 1970–2013 and Thirty-three Sub-Saharan African countries were selected based on data availability. The study employs the panel data co-integration and panel data error correction modelling approach to analyze the relationship between official development assistance and per capita Growth in these regions. The Autoregressive Conditional Heteroschedasticity (ARCH) and the General Autoregressive Conditional Heteroschedasticity (GARCH) models were also used to establish volatility with regards to official development assistance in the countries before the main analysis.ODA was found to have a positive and insignificant effect on West Africa, East Africa and non-oil exporting countries but the effect was positive and significant for Southern Africa, Central Africa and Oil Exporting countries. For West Africa, the effect became significant on growth only when Macroeconomic policy environment variables are captured. The study therefore recommends that government of Sub-Sahara countries embrace foreign international assistance while putting a befitting economically viable macroeconomic environment. And donor agencies should be more concerned in promoting good governance and policy framework in these countries than so much disbursement of ODA as such can undermine productive investment. This however will make the best of the ODA received.