Financial development and carbon dioxide emissions in Nigeria: evidence from the ARDL bounds approach

This study examines the dynamic impact of financial development, energy consumption, trade openness, and economic growth on carbon dioxide (CO2) emissions in Nigeria. We applied autoregressive distributed lag bound testing technique for the period of 1971-2010. The empirical result shows a long-run cointegration relationship among the variables. The long-run estimation result, however, reveals that, economic growth, development of the financial sector and energy consumption have a positive and significant impact on carbon dioxide emissions, whereas trade openness has negative and significant impact on carbon dioxide emissions. The finding suggest that the government should emphasize programs and policies that reduce carbon dioxide emissions by opening the trade sector considering the roles such openness plays in reducing environmental degradation in the country, which directly enhances environmental quality.