FINANCIAL DEVELOPMENT, URBANIZATION AND THE ENVIRONMENTAL NEXUS IN NIGERIA: A NON-LINEAR ANALYSIS

Abstract

This paper examines the determinants of carbon dioxide (CO2) emissions by analysing the consequences of financial development (FD) and urbanization (URB) accompanied by economic growth (RGDP) in Nigeria over the period 1986-2022. The study used nonlinear autoregressive distributive lag (NARDL) model posing the asymmetry aspect that can happen among financial development, urbanization and economic growth which movements in either of the variables. The analysis establishes the asymmetric effect of URB, FD and RGDP shocks on CO2 emissions both in the short run, while FD and RGDP shocks impacted CO2 emission in the long run. Moreover, RGDP contributed significantly to CO2 emissions both in the short- and long-run. The study also fulfils to a large degree the existence of EKC associating the unilateral (inverted U shape) connection among FD, RGDP and CO2 emissions in Nigeria. Furthermore, the error correction model confirms a short-run relationship among the variables. Finally, the study proposes the implementation and use of clean energies and technologies are vital for controlling environmental degradation in Nigeria.