IMPACT OF ENERGY COMMODITIES AND ECONOMIC GROWTH ON ENVIRONMENTAL OUTCOMES: INSIGHTS FROM NIGERIA

Abstract

This study explored the relationship between energy commodities, economic growth, and Nigeria's carbon dioxide (CO ) emissions spanning from 1981 to 2021. Employing the Vector Error Correction Mechanism (VECM) process, the study revealed a negative correlation between fossil fuel consumption, economic growth, and carbon dioxide emissions. Long-term elasticities indicate that carbon dioxide emissions would rise by 24 and 211% if both fossil fuel consumption and economic growth decreased by 1%, contradicting the Environmental Kuznets Curve (EKC) theory in Nigeria. Nevertheless, a positive correlation was observed between carbon dioxide emissions and the total annual population. As per the error correction model (ECM = -2.64441), two years are required for carbon dioxide emissions to return to long-term equilibrium, with 26.4% of a shock in the variable resolved within a year. Upon closer examination of the impulse response function, it is evident that GDPPC and FFC will exert a negative short- and long-term impact on CO emissions. The study proposes that Nigeria's government should implement a comprehensive strategy to bolster investments in renewable energy. This encompasses creating a stable policy environment, establishing ambitious targets for renewable energy capacity, providing financial incentives, and introducing feed-in tariffs, given that the country's consumption of fossil fuels has not yet reached a point where emissions are increasing