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Growth, Trade Openness and Environmental Degradation in Nigeria

Ajayi, Patricia and Ogunrinola, Adedeji (2020): Growth, Trade Openness and Environmental Degradation in Nigeria.

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Abstract

This study provides empirical insight into the relationship between growth, trade openness, and environmental degradation in Nigeria. The autoregressive distributed lag bounds testing approach was applied on time series data from 1960-2017. Employing the Pollution Haven and Environmental Kuznets Curve hypotheses, empirical findings validate the EKC hypothesis in Nigeria in the long-run. All estimated parameters were found to have the expected signs in the short- and long-run, except population, with the expected sign only in the long-run. The analysis proves that trade openness and population aid environmental degradation in the short-run. It reveals that financial development counters environmental degradation in both the short- and long-run, and real income per capita has a positive and significant effect on environmental degradation in both the short- and long-run. The coefficient of the error correction term suggests that 62.5% of the divergence between actual and equilibrium CO2 emissions is corrected annually. Post-estimation tests employed proves the robustness of the result. The RESET test affirmed the specification of the model and the CUSUM and CUSUM of squares tests confirm the stability of the parameters. Consequently, Nigeria should foster policies that encourage the development and utilization of renewable energy to boost economic development.

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