Foreign direct investment, energy consumption, carbon emissions and economic growth in Nigeria (1970-2014): an aggregate empirical analysis

Abstract

The paper examines the nexus between foreign direct investment (FDI), energy consumption, carbon emissions and economic growth in Nigeria within the period 1970-2014 using aggregate empirical analysis. We examine the stationarity properties of the variables in the presence of structural breaks. Besides, the autoregressive distributed lag (ARDL) bounds testing approach is employed to examine the long run relationship among the integrated series while we adopt Vector Error Correction Model (VECM) Granger causality approach to investigate the causal links among the variables. Our results confirm the existence of co-integration among these key variables. In addition, we find evidence of a feedback effect between foreign direct investment and energy consumption, a unidirectional causality running from FDI to carbon emissions. Foreign direct investment and carbon emissions enhance growth but energy consumption decreases economic growth in Nigeria. Policy makers are therefore advised to design policies aimed at attracting more foreign direct investment with deep green energy orientation to stimulate economic growth in Nigeria. Also, such policy should aim at rationally attracting the appropriate environmentally friendly foreign investors into the Nigerian economy.