The impact of financial development on energy consumption in Nigeria

Abstract

AbstractThis research evaluates the impact of financial development on energy consumption in Nigeria within the study period 1960–2019. Energy consumption in this study consists of fossil fuel energy consumption (FFEC) and renewable energy consumption (REEC). The ARDL bounds testing approach is used to determine whether a long‐run relationship exists among the variables. The findings showed evidence of a short‐run relationship. However, there was no long‐run relationship. In terms of FFEC, the study outcomes showed that financial development has a significant and negative impact on FFEC when domestic credit provided by the financial sector (DCPF) variable is used. However, the impact is not significant when the market capitalisation of listed domestic companies (MCAP) variable is used. Based on the Wald test, financial development variables at different lags jointly influence FFEC. For REEC, the results show that financial development significantly and positively impacts REEC at the 10% level of significance when the DCPF variable is used. However, it is insignificant when the MCAP variable is used. Using the Wald test, financial development variables at different lags jointly influence REEC. On the other hand, GDP is found to have a negative relationship with FFEC, but a positive relationship with REEC.