FINANCIAL DEVELOPMENT AND ENERGY CONSUMPTION IN NIGERIA

Abstract

The study examined the effect of financial development on energy consumption in Nigeria from 1990 to 2020. The study made use of secondary data and the data was analyzed using the Non-linear Autoregressive Distributed Lag Model (NARDL). Domestic credit to the private sector was used to measure financial development, while fossil fuel energy and renewable energy consumption were used to measure non-renewable and renewable energy respectively. Other variables included Gross domestic product, interest rate, and inflation. The study revealed that domestic private credit had a significant and negative impact on non-renewable energy only in the short run while changes in domestic credit had a significant and positive impact on renewable energy in Nigeria. This shows that the efforts of the financial sector so far in Nigeria have encouraged the consumption of renewable energy which therefore translates that the financial sector in Nigeria has a significant role to play in achieving Goal 7 target agenda of affordable and clean energy of the sustainable development. The study, therefore, recommends proper mobilization of funds from the financial sector towards investment in renewable energy considering the growing need for alternative energy sources in Nigeria. Also, policies that will discourage the use of non-renewable energy sources but encourage the use and affordability of renewable energy in Nigeria should be considered so that a reduction in environmental pollution, as well as improved health status, can be achieved.