The Dilemma of Minerals Dependent Economy: The case of Foreign Direct Investment and Pollution in Nigeria

Kingston, Kato Gogo (2011): The Dilemma of Minerals Dependent Economy: The case of Foreign Direct Investment and Pollution in Nigeria. Published in: African Journal of Social Sciences , Vol. 1, No. 1 (2 February 2011): pp. 1-13.

Abstract

This study empirically investigates the causal relationship between mineral exploration and environmental pollution in Nigeria with specific focus on natural gas and crude oil in Niger Delta region. The model of Granger causality tests was used. Quarterly data covering 2008 and 2009 were used in accordance with the Akaike (1976) minimum lag length for time-series analysis. The ADF unit root tests show that the null hypothesis of unit root is rejected and, the KPSS stationarity test result accepts the null hypothesis of "stationarity" implying that the variables are fit for the purpose of Granger causality analysis. The test for cointegration show that the variables are cointegrated at the trace level; this imply that gas flaring, environmental pollution and foreign direct investment are statistically linked. The regression on the ordinary least square illustrates that the impact of oil and natural gas exploration on the Nigerian environment is persistent in the long-run. The Granger-causality test result shows that there is one-way causality flowing from the flaring of gas by the foreign firms to the environmental pollution in Nigeria. The study finds a long-run uni-directional causal relationship flowing from mineral exploration to air, soil and water pollution.

• Item Type: MPRA Paper
• Language: English
• Keywords: Economy, Nigeria, Mineral, Pollution, Africa, Environment
• Subjects: D - Microeconomics > D0 - General; K - Law and Economics > K2 - Regulation and Business Law; F - International Economics > F1 - Trade > F18 - Trade and Environment; K - Law and Economics > K3 - Other Substantive Areas of Law; D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis; F - International Economics > F0 - General > F02 - International Economic Order and Integration; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q56 - Environment and Development ; Environment and Trade ; Sustainability ; Environmental Accounts and Accounting ; Environmental Equity ; Population Growth; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture ; Natural Resources ; Energy ; Environment ; Other Primary Products; K - Law and Economics > K1 - Basic Areas of Law; K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior

References

Akaike, H. (1976) Canonical correlation analysis of time series and the use of an information criterion, cited in Systems Identification, ed. R. K. Mehra & D. G. Lainiotie, 27-96. New York: Academic Press

Al Gedicks (2001) Resources Rebels, Canada: South End Press

Alfaro, L (2003) Foreign Direct Investment and Growth: Does the Sector Matter? Harvard Business School, April 2003

Collier, Paul, and Anke Hoeffler (2004) "Greed and Grievance in Civil War" Oxford Economic Papers 56, 663-95

De Soysa, I (2002) ‘Paradise is a Bazaar? Greed, Creed, Grievance and Governance’, Journal of Peace Research 39(4): 395–416.

Dickey, D. A. and Fuller, W. A. (1981) "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root", Econometrica, 49, 1057-72.

Elvidge, CD; Ziskin, D; Baugh, KE; Tuttle, BT; Ghosh, T; Pack, DW; Erwin, EH; Zhizhin, M (2009), A Fifteen Year Record of Global Natural Gas Flaring Derived from Satellite Data. Energies 2 (3) 595-622. http://www.mdpi.com/1996-1073/2/3/595/ [Accessed 30/12/2009]

Engle, R F. (1982) Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation, Econometrica, 50(4), 987-1007

Engle, R F., and Manganelli, Simone (1999) CAViaR: Conditional Autoregressive Value at Risk by Regression Quartiles, University of California, San Diego, Department of Economics Working Paper 99-20.

Engle, Robert F., and Mezrich, Joseph (1996) GARCH for Groups, RISK, 9(8), 36-40.

Engle, R F., and Ng, Victor, (1993) Measuring and Testing the Impact of News on Volatility, Journal of Finance, 48, 1749-1778

Ewa-Oboho, I. and Oladimej, O. (998) Studies on the Short-Term Effects of the Mobil Idoho Oil Spill on the Littoral Biota of South-Eastern Nigeria, being a joint study for Institute of Oceanography, University of Calabar, P.M.B. 1115, Calabar, Nigeria and the department of Food Technology, Awolowo University, Ile-Ife, Nigeria

Fearon, J D & Laitin, D. D (2003) Ethnicity, insurgency, and civil war; American Political Science Review 97(1): 1–16.

Friends of the Earth (2005) “Gas Flaring in Nigeria: A Human Rights, Environmental and Economic Monstrosity”, Published by “Environmental Rights Action and Friends of the Earth”.

Gray, K. R (2002) “Foreign Direct Investment and Environmental Impacts: Is the Debate Over?” London: Blackwell pp. 306-312.

Granger, C. W. (1969) “Investigating Causal Relations by Econometric Models and Cross-Spectral Methods”, Econometrica, 37 (3), 422-438.

Granger, C. W. (1994) “Some Comments on Empirical Investigations Involving Cointegration”, Econometric Review, 13 (3), 345-350

Granger, C. W. (1980) “Testing for Causality”, Journal of Economic Dynamics and Control, 2, 329-352.

Granger, C. W, J. (1981) “Some Properties of Time Series Data and Their use in Econometric Model Specification”, Journal of Econometrics, 16, 121-130

Ime R. Udotong, Samuel I. Eduok, Joseph P. Essien, and Basil N. Ita (2008) “Density of Hydrocarbonoclastic Bacteria and Polycyclic Aromatic Hydrocarbon Accumulation in Iko River Mangrove Ecosystem, Nigeria”; Report sponsored and published by the World Academy of Science, Engineering and Technology Volume 34, found online at: http://www.waset.org/journals/waset/v44/v44-136.pdf [Accessed 7/10/2009]

Johansen S. (1988) "Statistical analysis of Cointegration vectors", Journal of Economic Dynamics and Control, 12:231-54

Johansen, S. and Jesulius, K. (1990) “Maximum likelihood estimation and inference on cointegration-with application to the demand for money”, Oxford Bulletin of Economics and Statistics, 52: 169-210

Kingston, K G (2010a) The Dynamics of Gang Criminality in Nigeria: A Time Series Analysis, The Journal of Social Criminology ~ Vol. 3.1, Autumn/Winter, Republic of Ireland: Greenhouse Press

Kingston, K G (2010b) (Unpublished) Environmental and Human Rights Implication of Foreign Direct Investment in Nigeria: The Case of Minerals Exploration in the Niger Delta, PhD Thesis, School of Law, University of East London

Kretzmann, S and Wright, S (1997) Human Rights and Environmental Information on the Royal Dutch/Shell Group of Companies, 1996-1997: An Independent Annual Report(San Francisco and Berkeley, CA: Rainforest Action Network and Project Underground, May 1997), p.6.

Kwiatkowski, D., Phillips P.C.B., Schmidt P., Shin Y. (1992) Testing the null hypothesis of stationarity against the alternative of a unit root; Journal of Econometrics 54, 159-178

Meisel, N (2004) Governance Culture and Development: A Different Perspective on Corporate Governance. Organisation for Economic Co-operation and Development; Illustrated edition, p. 41

Mohan, R. (2006); "Causal Relationship Between Savings And Economic Growth In Countries With Different Income Levels." Economics Bulletin, Vol. 5, No. 3 pp. 1−12)

Nwilo, P.C. & O.T. Badejo, (2005): Oil Spill Problems and Management in the Niger Delta. International Oil Spill Conference, Miami, Florida, USA

Porter, M. E. (1990) The Competitive Advantage of Nations. New York: Free Press.

Porter, C (1999) “Trade Competition and Pollution Standards: Race to the Bottom or Stuck at the Bottom” 8:2 Journal of environment and Development, 133

Ross, M. L. (2003) Nigeria’s Oil Sector and the Poor, Prepared for the UK Department for International Development “Nigeria: Drivers of Change” program (May 23)

Ross, M (2006a) Mineral Wealth and Equitable Development, A Background Paper for the World Development Report

Ross, M (2006b) "A Closer Look at Oil, Diamonds, and Civil War" Annual Review of Political Science 9: 265-300

Scott, W.R (2004) Institutional Theory: Contributing to a Theoretical Research Program, in Great Minds in Management: The Process of Theory Development, Ken G. Smith and Michael A. Hitt, eds. Oxford UK: Oxford University Press.

UNDP (2006), UNDP: Niger Delta, Human Development Report (Nigeria)

UNDP and World Bank (2009) “Strategic Gas Plan for Nigeria, Joint UNDP/World Bank Energy Sector Management Assistance Programme (ESMAP)” found online at: www.bayelsa.org.uk/bayelsa-state-environment.html [accessed 30/6/2009]

United States Energy and Information Administration and, the Oil and Gas Journal (OGJ), 2009

Xing Y and Kolstad C D. (2000) Do Lax Environmental Regulations Attract Foreign Investment? Paper of the International Development Program, International University of Japan and Department of Economics, University of California, Santa Barbara, CA 93106-9210 USA