Asymmetric Effect of Financial Development and Urbanization on the Environment: Evidence from Nigeria
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Abstract
The study examines the influence of financial development (FD) and urbanization (URB) in the presence of economic growth (RGDP) on the environment – captured by ecological footprint – in the case of Nigeria over the period 1986-2022. This study employed the nonlinear autoregressive distributive lag (NARDL) model to capture the asymmetry that arises from positive or negative components of financial development, urbanization and economic growth. Our result confirms the existence of an asymmetric effect of URB, FD and RGDP on the ecological footprint in the short-run, while it was only FD and RGDP that impacted the ecological footprint in the long-run. Moreover, our empirical finding also suggests that RGDP has a significant contribution to ecological footprint in the short- and long-term, significantly supporting the existence of the EKC hypothesis both in the long and short terms and confirming the inverted U-shaped connection between RGDP and ecological footprint in Nigeria. Further, the error correction model (ECM) confirms a short-run relationship among the variables. Finally, we suggest that the implementation and use of clean energies and technologies are vital for controlling the environment in Nigeria.
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