Investigating the link between economic growth, financial development, urbanization, natural resources, human capital, trade openness and ecological footprint: evidence from Nigeria

Abstract

Driven by the increasing level of environmental degradation in developing countries, especially Nigeria, and the conflicting empirical results, this study investigates the impact of economic growth, natural resources, urbanization, human capital, financial development, foreign direct investment, and trade openness on the ecological footprint (EFP) in Nigeria between 1970 and 2017. The study accounts for structural breaks in the data using the Zivot–Andrews unit root method along with other conventional unit root tests. Autoregressive Distributive Lag (ARDL) and Granger causality estimation techniques are used to determine the short- and long-run effect as well as the causal direction between the variables. The outcomes of the study suggest that economic growth, foreign direct investment, and trade openness contribute positively to EFP, hence worsening environmental quality. However, urbanization, financial development, natural resources, and human capital abate the EFP in Nigeria. The findings from the granger causality test reveal a unidirectional causality from economic growth, foreign direct investment, and trade openness to EFP; while bidirectional causality exists between natural resources and EFP; and urbanization and EFP. The results are robust to different estimation techniques. Lastly, measures to ensure environmental sustainability in the context of Nigeria are suggested.