Effects of renewable energy consumption and financial development: Using Nigeria’s economy as a case study

Abstract

• Nigeria's financial development and the long-term and short-term influence of energy use were assessed. • Auto regressive distribution lag model was used to know the long-term effect of energy demand on the Nigerian economy. • Energy use coefficient is positive and inconsequential in the short run. • CUSUM Test is used as the residual model. Nigeria's financial development and the long-term and short-term influence of energy use on the country's economy were both assessed in the study. The findings of previous studies contradict the theoretical assumptions and predictions from this study which states that emerging and developing economies, according to which financial progress does not lead to increased renewable energy consumption. Using the Auto regressive distribution lag (ARDL) co-integration process and a survey that spanned 60 years from the World Development Indicators in the World Bank database, the ARDL co-integration indicated that financial sector intermediation had a significant positive and long-term effect on energy demand in the Nigerian economy and this also was used to organize the data. Nigeria has a long-term link between the financial sector and renewable energy consumption, which over the past 60 years has shown little or no investment in renewable energy. This study also determined that despite the short-term effect, the rise of the financial industry has a positive impact on the Nigerian economy because of the high level of energy consumption. Policies that focus on increasing the financial sector's size have significant and far-reaching consequences for Nigeria's energy use. Furthermore, it was discovered that the country's energy demand expanded for over 60 years, leading to the increasing energy demand, and epileptic power failure in the country. Finally, this research seeks to bolster renewable energy investment through informed and deliberate policies