DOES ENERGY POVERTY UNDERMINE ENVIRONMENTAL SUSTAINABILITY? EVIDENCE FROM NIGERIA

Abstract

This study explores the nexus between energy poverty and environmental sustainability in Nigeria using annual data from 1995-2024 sourced from the World Development Indicators. Environmental sustainability was measured through institutional policy ratings, while energy poverty served as the core explanatory variable, complemented by access to electricity, electricity consumption per capita, fossil fuel use, and access to clean fuel as threshold variables. Foreign direct investment, urbanisation, and per capita income were included as controls. Employing the autoregressive distributed lag (ARDL) approach, the results confirmed long-run cointegration among the variables. The short-run estimates revealed largely insignificant effects, though access to electricity and clean fuel exhibited contractionary tendencies. In the long run, access to electricity and urbanisation significantly improved environmental sustainability, whereas energy poverty, fossil fuel dependence, foreign direct investment, and per capita income exerted adverse effects, reflecting structural inefficiencies and enclave-type investment practices. Post-estimation diagnostics confirmed the robustness of the model. From a policy perspective, the findings underscore the need to reduce energy poverty through broader electricity access and clean energy adoption, promote sustainable urbanisation with adequate infrastructure, and restructure foreign investment to maximise domestic spillovers. Failure to address fossil fuel dependence risks undermining Nigeria’s long-run environmental sustainability agenda.