Impact of Carbon Dioxide Emissions and Financial Development on Economic Growth in Nigeria: An ARDL Approach

Abstract

Many studies have been conducted on the impact of carbon dioxide emission and economic growth in Nigeria using different techniques, however several studies did not consider the role of financial sector development in their analysis. Therefore, this study examines the impact of CO2 emission and financial development on the growth of economy in Nigeria using ARDL bounds testing technique from 1981 to 2021. The result of the bounds test to cointegration indicates that there is a long run cointegration among the variables, since the F-statistic of 23.10816 is greater than the upper bound at 1% level. The results of the estimation show that rising emission has a significant and positive impact on economic growth in Nigeria. In addition, openness and financial development has a significant and positive effect on the growth of Nigerian economy, while domestic investment has a negative but significant impact on economic growth. Based on these findings, this study makes the following recommendations; First, government should apply appropriate policy to curb emission, since increase production leads to more environmental hazards which translate to economic growth in Nigeria. Second, government should spell out the consequences for polluters and others mining companies who failed to abide by the government directives.