RE-EXAMINING THE KEY DRIVERS OF ENVIRONMENTAL DEGRADATION IN NIGERIA: A DYNAMIC ARDL APPROACH

This study aims to re-examine the key drivers of environmental degradation in Nigeria, focusing on the roles of financial development, foreign direct investment (FDI), and economic growth. It employs a dynamic Autoregressive Distributed Lag (ARDL) approach and the non-parametric Diks and Panchenko (2006) Granger causality test to analyse quarterly time series data from the first quarter (Q1) in 1970 to the fourth quarter (Q4) of 2022. The findings revealed a significant positive impact of financial development and FDI inflows on environmental degradation, both in the short and long run. The study validated the Environmental Kuznets Curve (EKC) hypothesis, demonstrating an inverted U-shaped relationship between economic growth and environmental degradation. The nonparametric causality test uncovered a non-linear bidirectional causal relationship between environmental degradation and financial development and a unidirectional causality running from FDI to environmental degradation. The study contributes to the existing literature by providing empirical evidence from Nigeria that supports the EKC hypothesis and by employing dynamic models and non-parametric tests to account for potential nonlinearities and dependencies. It offers insights into the complex interplay between economic factors, financial development, and environmental degradation, highlighting the need for a holistic approach to address environmental degradation while promoting sustainable economic development.