EXAMINING THE LINK BETWEEN GREEN ENERGY ADOPTION AND ECONOMIC PROGRESS: EVIDENCE FROM NIGERIA

Abstract

This study investigates the impact of renewable energy consumption on economic growth and productivity in Nigeria, using two distinct datasets spanning 1990–2023 and 2000–2023. Employing the Autoregressive Distributed Lag (ARDL) bounds testing approach and Pairwise Granger causality analysis, the study provides new insights into the dynamic and causal relationships among key macroeconomic variables. The findings reveal that renewable energy consumption has a significant negative effect on economic growth in the long run and a consistently negative impact on economic productivity in both the short and long term. Causality tests show a unidirectional relationship from economic growth to renewable energy consumption, and from renewable energy consumption to economic productivity. While foreign direct investment (FDI) and trade openness positively influence economic growth, they are found to hinder productivity. Conversely, natural resource endowment negatively affects growth but enhances productivity. Domestic credit to the private sector supports both growth and productivity. These findings highlight the need for strategic policies that position renewable energy as a complementary input to production while maintaining economic stability. The study recommends a phased transition to renewable energy, supported by financial incentives, modern infrastructure investment, and enhanced research and development. Such measures will help Nigeria achieve sustainable and inclusive economic transformation.