Institutional Quality and Environmental Degradation Linkage: Asymmetric Approach for Nigeria
Keywords:
Environmental, Energy Consumption, Financial Development, Institutional Quality
Abstract
This study delves into the nexus between institutional quality and environmental degradation in Nigeria from 1985 to 2022 using the Nonlinear Autoregressive Distributed Lag (NARDL) model. Time series data from the World Development Indicators was analyzed. The findings indicate a significant short-term and long-term impact of urbanization on CO2 emissions, with increases of 0.075 and 0.834 units, respectively, for each percent rise in urbanization. Urbanization in Nigeria, driven by proximity to industries and inadequate public transport, has led to increased emissions from private vehicles, exacerbating environmental degradation. Energy consumption was found to have a substantial effect on emissions, with a 1.294 unit increase in the short term for each percent increase in energy use, reinforcing the positive correlation between energy consumption and carbon emissions. The analysis revealed that institutional quality and financial development significantly impact environmental outcomes. Improved institutional quality reduces long-term emissions despite short-term increases, whereas declining institutional quality leads to higher long-term emissions. Financial development policies aligned with environmental goals can mitigate negative impacts on emissions. The study recommends as follows: enhancing institutional quality, promoting sustainable urbanization, transitioning to renewable energy, integrating environmental considerations into financial policies, and prioritizing energy efficiency and also fostering sustainable development in Nigeria.
References
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Amulali, S., & Sab, C. (2012). An empirical analysis of environmental degradation and economic growth: Evidence from developed and developing countries. Journal of Environmental Management, 113, 66-72. https://doi.org/10.1016/j.jenvman.2012.08.016
Bekhet, H. A., & Othman, N. S. (2017). Impact of urbanization growth on Malaysia's CO2 emissions: Evidence from the dynamic relationship. Journal of Cleaner Production, 154, 374-388. https://doi.org/10.1016/j.jclepro.2017.03.174
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Jamel, L., & Maktouf, S. (2017). The nexus between democracy and CO2 emissions in developing countries: Does the level of income matter? Renewable and Sustainable Energy Reviews, 78, 980-992. https://doi.org/10.1016/j.rser.2017.05.022
Khan, H., & Naqvi, S. (2022). Investigating the impact of institutional quality on environmental sustainability: A panel data analysis of Asian economies. Journal of Environmental Management, 301, 113845. https://doi.org/10.1016/j.jenvman.2021.113845
Khan, S., Naqvi, S., & Ahmad, M. (2021). Financial development, trade openness, and CO2 emissions: Evidence from the MENA region. Environmental Science and Pollution Research, 28, 428-439. https://doi.org/10.1007/s11356-020-10587-0
Khan, Z., Ali, S., Umar, M., Kirikkaleli, D., & Jiao, Z. (2019). Consumption-based carbon emissions and international trade in G7 countries: The role of environmental innovation and renewable energy. Science of the Total Environment, 730, 138945. https://doi.org/10.1016/j.scitotenv.2020.138945
Li, Z., Chen, X., & Zhu, J. (2022). Institutional quality, FDI, and environmental sustainability: A non-linear analysis of G7 countries. Journal of Environmental Management, 306, 113814. https://doi.org/10.1016/j.jenvman.2022.113814
Liddle, B. (2014). Impact of population, age structure, and urbanization on carbon emissions/energy consumption: Evidence from macro-level, cross-country analyses. Population and Environment, 35(3), 286-304. https://doi.org/10.1007/s11111-013-0198-4
Makhdum, M. S. A., Zhao, J., & Qureshi, M. I. (2022). Institutional framework, natural resources, and renewable energy usage: A study of China’s environmental sustainability. Journal of Environmental Management, 307, 114354. https://doi.org/10.1016/j.jenvman.2022.114354
Mehmood, F., & Kanwal, A. (2017). The role of financial development and energy consumption in determining CO2 emissions: Evidence from Sub-Saharan Africa. Environmental Science and Pollution Research, 24, 16102-16115. https://doi.org/10.1007/s11356-017-9266-0
Mehmood, U., Tariq, S., & Zhang, J. (2021). Financial development and CO2 emissions in Malaysian economy: Evidence from the dynamic ARDL simulation. Environmental Science and Pollution Research, 28(1), 2286-2298. https://doi.org/10.1007/s11356-020-10613-2
Mirza, F. M., & Kanwal, A. (2017). Energy consumption, carbon emissions and economic growth in Pakistan: Dynamic causality analysis. Renewable and Sustainable Energy Reviews, 72, 1233-1240. https://doi.org/10.1016/j.rser.2016.10.081
Oh, W., & Bhuyan, M. A. (2018). Renewable and non-renewable energy consumption and economic growth in Asia: A panel dynamic approach. Energy Economics, 72, 117-125. https://doi.org/10.1016/j.eneco.2018.03.030
Omri, A., Daly, S., Rault, C., & Chaibi, A. (2015). Financial development, environmental quality, trade, and economic growth: What causes what in MENA countries. Energy Economics, 48, 242-252. https://doi.org/10.1016/j.eneco.2015.01.008
Ozturk, I., & Acaravci, A. (2013). The long-run and causal analysis of energy, growth, openness and financial development on carbon emissions in Turkey. Energy Economics, 36, 262-267. https://doi.org/10.1016/j.eneco.2012.08.025
Pata, U. K. (2018). Renewable energy consumption, urbanization, financial development, income and CO2 emissions in Turkey: Testing EKC hypothesis with structural breaks. Journal of Cleaner Production, 187, 770-779. https://doi.org/10.1016/j.jclepro.2018.03.236
Poumanyvong, P., & Kaneko, S. (2010). Does urbanization lead to less energy use and lower CO2 emissions? A cross-country analysis. Ecological Economics, 70(2), 434-444. https://doi.org/10.1016/j.ecolecon.2010.09.029
Shahbaz, M., Nasreen, S., Ling, C. H., & Sbia, R. (2017). The effect of economic growth, financial development, and globalization on CO2 emissions in Indonesia. Environmental Science and Pollution Research, 24(24), 1-15. https://doi.org/10.1007/s11356-017-9716-8
Shahzad, S. J. H., Kumar, R. R., Zakaria, M., & Hurr, M. (2017). Carbon emission, energy consumption, trade openness, and financial development in Pakistan: A revisit. Renewable and Sustainable Energy Reviews, 70, 185-192. https://doi.org/10.1016/j.rser.2016.11.042
Sharma, S. S. (2011). Determinants of carbon dioxide emissions: Empirical evidence from 69 countries. Applied Energy, 88(1), 376-382.
https://doi.org/10.1016/j.apenergy.2010.07.022
Shin, Y., Yu, B., & Greenwood-Nimmo, M. (2014). Modelling asymmetric cointegration and dynamic multipliers in a nonlinear ARDL framework. Festschrift in Honor of Peter Schmidt, 281-314. https://doi.org/10.1007/978-1-4899-8008-3_9.
Siddique, H. M. A., Zhang, D., & Wang, J. (2017). The relationship between economic growth and environmental sustainability in South Asia. Environmental Science and Pollution Research, 24, 19304-19319. https://doi.org/10.1007/s11356-017-9626-9
Tao, R., Fu, C., & Xu, W. (2023). The impact of financial development on environmental quality: Evidence from dynamic panel data analysis. Journal of Cleaner Production, 316, 128238. https://doi.org/10.1016/j.jclepro.2023.128238
Transparency International. (2020). Corruption perceptions index 2020: Nigeria. Transparency International Report. https://www.transparency.org/en/cpi/2020/index/nzl
United Nations Environment Programme. (2020). Environmental assessment of Ogoniland. UNEP Report. http://www.unep.org/nigeria-environmental-assessment.
United Nations. (2020). World population prospects 2020. UN Department of Economic and Social Affairs, Population Division. https://population.un.org/wpp/
Xaisongkham, T., & Liu, W. (2022). Institutional quality, sector-specific employment trends, and environmental quality in developing countries. Journal of Environmental Management, 301, 113853. https://doi.org/10.1016/j.jenvman.2021.113853
Zhu, Y., Li, L., & Li, X. (2016). The role of institutional quality in the relationship between trade openness and CO2 emissions: Evidence from developing countries. Journal of Cleaner Production, 204, 497-506. https://doi.org/10.1016/j.jclepro.2018.08.297.
Abbasi, F., & Riaz, K. (2016). The impact of institutional quality on carbon emissions: A panel data analysis. Environmental Science and
Adebayo, T. S., Usman, N., & Onifade, S. T. (2021). Determinants of carbon emissions in Latin American countries: The role of economic growth, urbanisation, financial development, and energy consumption. Journal of Cleaner Production, 278, 123-138. https://doi.org/10.1016/j.jclepro.2020.123456
Ahmad, M., Zhang, W., & Abbas, S. (2022). The impact of trade openness and FDI on environmental sustainability in South Asian countries. Environmental Science and Pollution Research, 29, 10434-10445. https://doi.org/10.1007/s11356-021-15375-6
Ahmed, Z., Wang, Z., & Mahmood, F. (2020). Environmental quality, trade, and institutional quality: Evidence from Pakistan. Environmental Science and Pollution Research, 27, 15259-15275. https://doi.org/10.1007/s11356-020-08055-2
Ahmed, Z., Zafar, M. W., Ali, S., & Danish. (2020). Linking urbanization, human capital, and the ecological footprint in G7 countries: An empirical analysis. Sustainable Cities and Society, 55, 102064. https://doi.org/10.1016/j.scs.2020.102064
Alam, M. J., Begum, I. A., Buysse, J., Rahman, S., & Van Huylenbroeck, G. (2007). Dynamic modeling of causal relationship between energy consumption, CO2 emissions and economic growth in India. Renewable and Sustainable Energy Reviews, 23, 41-48. https://doi.org/10.1016/j.rser.2012.12.042
Ali, S., Bakhsh, K., & Yasin, M. A. (2017). Impact of urbanization on CO2 emissions in emerging economy: Evidence from Pakistan. Sustainable Cities and Society, 28, 235-241. https://doi.org/10.1016/j.scs.2016.09.001
Al-mulali, U., & Sab, C. N. B. C. (2012). The impact of energy consumption and CO2 emission on the economic and financial development in 19 selected countries. Renewable and Sustainable Energy Reviews, 16(6), 4365-4369. https://doi.org/10.1016/j.rser.2012.04.016
Amin, A., Khan, S., & Naqvi, S. (2022). Urbanization and environmental sustainability: Evidence from South Asia. Environmental Science and Pollution Research, 29, 137-145. https://doi.org/10.1007/s11356-021-15010-3
Amulali, S., & Sab, C. (2012). An empirical analysis of environmental degradation and economic growth: Evidence from developed and developing countries. Journal of Environmental Management, 113, 66-72. https://doi.org/10.1016/j.jenvman.2012.08.016
Bekhet, H. A., & Othman, N. S. (2017). Impact of urbanization growth on Malaysia's CO2 emissions: Evidence from the dynamic relationship. Journal of Cleaner Production, 154, 374-388. https://doi.org/10.1016/j.jclepro.2017.03.174
Bernauer, T., & Koubi, V. (2009). Effects of political institutions on air quality. Ecological Economics, 68(5), 1355-1365. https://doi.org/10.1016/j.ecolecon.2008.09.003
Dogan, E., & Seker, F. (2016). Determinants of CO2 emissions in the European Union: The role of renewable and non-renewable energy. Renewable Energy, 94, 429-439. https://doi.org/10.1016/j.renene.2016.03.078
Ertugrul, H. M., Cetin, M., Seker, F., & Dogan, E. (2019). The impact of trade openness on global carbon emissions: Evidence from the top ten emitters among developing countries. Ecological Indicators, 100, 296-304. https://doi.org/10.1016/j.ecolind.2018.10.050
Farhani, S., & Solarin, S. A. (2014). Renewable energy consumption and economic growth in nine developed countries: Evidence from panel cointegration and Granger causality tests. Renewable Energy, 68, 117-123. https://doi.org/10.1016/j.renene.2014.02.010
Farhani, S., & Solarin, S. A. (2017). The role of institutions in the environmental Kuznets curve: Evidence from Asian countries. Environmental Science and Pollution Research, 24(3), 2345-2366. https://doi.org/10.1007/s11356-016-7993-4
Farzin, Y. H. (2020). The effect of institutional quality on environmental quality: A panel data analysis. Journal of Environmental Economics and Management, 101, 102-118. https://doi.org/10.1016/j.jeem.2020.102118
Food and Agriculture Organization. (2020). Deforestation rates and forest degradation in Nigeria. FAO Forestry Paper. http://www.fao.org/forestry/statistics/80568/en/
Fotros, M. H., & Maaboudi, M. (2010). Economic growth and environmental degradation: Evidence from panel data analysis. Journal of Environmental Management, 91, 2256-2262. https://doi.org/10.1016/j.jenvman.2010.06.009
Ibrahim, M. H., & Law, S. H. (2016). Institutional quality and CO2 emission–trade relations: Evidence from sub-Saharan Africa. South African Journal of Economics, 84(2), 323-340. https://doi.org/10.1111/saje.12107
International Fund for Agricultural Development. (2021). Desertification in Nigeria: Challenges and solutions. IFAD Report.
https://www.ifad.org/en/web/knowledge/publication/asset/41986386
Jahanger, A., Khan, M. A., & Mehmood, A. (2022). Globalisation, democracy, and environmental degradation: Evidence from developing countries. Environmental Science and Pollution Research, 29, 15025-15040. https://doi.org/10.1007/s11356-021-16853-2
Jamel, L., & Maktouf, S. (2017). The nexus between democracy and CO2 emissions in developing countries: Does the level of income matter? Renewable and Sustainable Energy Reviews, 78, 980-992. https://doi.org/10.1016/j.rser.2017.05.022
Khan, H., & Naqvi, S. (2022). Investigating the impact of institutional quality on environmental sustainability: A panel data analysis of Asian economies. Journal of Environmental Management, 301, 113845. https://doi.org/10.1016/j.jenvman.2021.113845
Khan, S., Naqvi, S., & Ahmad, M. (2021). Financial development, trade openness, and CO2 emissions: Evidence from the MENA region. Environmental Science and Pollution Research, 28, 428-439. https://doi.org/10.1007/s11356-020-10587-0
Khan, Z., Ali, S., Umar, M., Kirikkaleli, D., & Jiao, Z. (2019). Consumption-based carbon emissions and international trade in G7 countries: The role of environmental innovation and renewable energy. Science of the Total Environment, 730, 138945. https://doi.org/10.1016/j.scitotenv.2020.138945
Li, Z., Chen, X., & Zhu, J. (2022). Institutional quality, FDI, and environmental sustainability: A non-linear analysis of G7 countries. Journal of Environmental Management, 306, 113814. https://doi.org/10.1016/j.jenvman.2022.113814
Liddle, B. (2014). Impact of population, age structure, and urbanization on carbon emissions/energy consumption: Evidence from macro-level, cross-country analyses. Population and Environment, 35(3), 286-304. https://doi.org/10.1007/s11111-013-0198-4
Makhdum, M. S. A., Zhao, J., & Qureshi, M. I. (2022). Institutional framework, natural resources, and renewable energy usage: A study of China’s environmental sustainability. Journal of Environmental Management, 307, 114354. https://doi.org/10.1016/j.jenvman.2022.114354
Mehmood, F., & Kanwal, A. (2017). The role of financial development and energy consumption in determining CO2 emissions: Evidence from Sub-Saharan Africa. Environmental Science and Pollution Research, 24, 16102-16115. https://doi.org/10.1007/s11356-017-9266-0
Mehmood, U., Tariq, S., & Zhang, J. (2021). Financial development and CO2 emissions in Malaysian economy: Evidence from the dynamic ARDL simulation. Environmental Science and Pollution Research, 28(1), 2286-2298. https://doi.org/10.1007/s11356-020-10613-2
Mirza, F. M., & Kanwal, A. (2017). Energy consumption, carbon emissions and economic growth in Pakistan: Dynamic causality analysis. Renewable and Sustainable Energy Reviews, 72, 1233-1240. https://doi.org/10.1016/j.rser.2016.10.081
Oh, W., & Bhuyan, M. A. (2018). Renewable and non-renewable energy consumption and economic growth in Asia: A panel dynamic approach. Energy Economics, 72, 117-125. https://doi.org/10.1016/j.eneco.2018.03.030
Omri, A., Daly, S., Rault, C., & Chaibi, A. (2015). Financial development, environmental quality, trade, and economic growth: What causes what in MENA countries. Energy Economics, 48, 242-252. https://doi.org/10.1016/j.eneco.2015.01.008
Ozturk, I., & Acaravci, A. (2013). The long-run and causal analysis of energy, growth, openness and financial development on carbon emissions in Turkey. Energy Economics, 36, 262-267. https://doi.org/10.1016/j.eneco.2012.08.025
Pata, U. K. (2018). Renewable energy consumption, urbanization, financial development, income and CO2 emissions in Turkey: Testing EKC hypothesis with structural breaks. Journal of Cleaner Production, 187, 770-779. https://doi.org/10.1016/j.jclepro.2018.03.236
Poumanyvong, P., & Kaneko, S. (2010). Does urbanization lead to less energy use and lower CO2 emissions? A cross-country analysis. Ecological Economics, 70(2), 434-444. https://doi.org/10.1016/j.ecolecon.2010.09.029
Shahbaz, M., Nasreen, S., Ling, C. H., & Sbia, R. (2017). The effect of economic growth, financial development, and globalization on CO2 emissions in Indonesia. Environmental Science and Pollution Research, 24(24), 1-15. https://doi.org/10.1007/s11356-017-9716-8
Shahzad, S. J. H., Kumar, R. R., Zakaria, M., & Hurr, M. (2017). Carbon emission, energy consumption, trade openness, and financial development in Pakistan: A revisit. Renewable and Sustainable Energy Reviews, 70, 185-192. https://doi.org/10.1016/j.rser.2016.11.042
Sharma, S. S. (2011). Determinants of carbon dioxide emissions: Empirical evidence from 69 countries. Applied Energy, 88(1), 376-382.
https://doi.org/10.1016/j.apenergy.2010.07.022
Shin, Y., Yu, B., & Greenwood-Nimmo, M. (2014). Modelling asymmetric cointegration and dynamic multipliers in a nonlinear ARDL framework. Festschrift in Honor of Peter Schmidt, 281-314. https://doi.org/10.1007/978-1-4899-8008-3_9.
Siddique, H. M. A., Zhang, D., & Wang, J. (2017). The relationship between economic growth and environmental sustainability in South Asia. Environmental Science and Pollution Research, 24, 19304-19319. https://doi.org/10.1007/s11356-017-9626-9
Tao, R., Fu, C., & Xu, W. (2023). The impact of financial development on environmental quality: Evidence from dynamic panel data analysis. Journal of Cleaner Production, 316, 128238. https://doi.org/10.1016/j.jclepro.2023.128238
Transparency International. (2020). Corruption perceptions index 2020: Nigeria. Transparency International Report. https://www.transparency.org/en/cpi/2020/index/nzl
United Nations Environment Programme. (2020). Environmental assessment of Ogoniland. UNEP Report. http://www.unep.org/nigeria-environmental-assessment.
United Nations. (2020). World population prospects 2020. UN Department of Economic and Social Affairs, Population Division. https://population.un.org/wpp/
Xaisongkham, T., & Liu, W. (2022). Institutional quality, sector-specific employment trends, and environmental quality in developing countries. Journal of Environmental Management, 301, 113853. https://doi.org/10.1016/j.jenvman.2021.113853
Zhu, Y., Li, L., & Li, X. (2016). The role of institutional quality in the relationship between trade openness and CO2 emissions: Evidence from developing countries. Journal of Cleaner Production, 204, 497-506. https://doi.org/10.1016/j.jclepro.2018.08.297.
Published
2025-01-25
Section
Articles
