CONSUMPTION, CO₂ EMISSIONS AND ECONOMIC GROWTH: AN EMPIRICAL EVIDENCE FROM  NIGERIA.

Aribatise Adekunle¹ & Elufisan Omowunmi Olaronke²

¹ Department of Economics, Wesley University, Ondo, Ondo State, Nigeria.

²Department of Economics, Accounting and Finance, Bells University, Sango Ota, Ogun State

Email: kundun95@gmail.com

Abstract: The study examined the causal relationship and dynamic interaction among Energy Consumption (ENCOM), Carbon Dioxide Emission (CO₂) and Gross Domestic Product (GDP) in Nigeria. These were with the view to examining the relative effectiveness of CO₂ Emission and Energy Consumption on the Nigerian economy. Annual data over the period of 1980 to 2015, sourced from the World Bank Development Indicators, and the Central Bank of Nigeria (CBN) Statistical Bulletin, were used for the study. Time series econometrics (Granger Causality and Vector Error Correction Model) was applied to test the causal relationship, and the interaction among the variables respectively. The results established a unidirectional causality among CO₂ and ENCOM and GDP; meaning that as the economy experiences growth, there exist a corresponding increase in Energy Consumption as people tends to consume more energy, thus the rate of pollution also increases. The variance decomposition showed that a shock on CO₂ Emissions and ENCOM respectively have significant and lasting impact on the Nigerian gross domestic product i.e. a possible increase in CO₂ emissions which results in decline in environmental quality may generate negative externalities for the economy and that Energy which is a direct input in the production process is seen as a prerequisite for economic growth in Nigeria. The paper recommends that the Government should enact policies that will enable firms to utilize advance technology which emits less carbon dioxide and enhances domestic production. Therefore, concerned authorities can achieve a dramatic drop in carbon intensity by encouraging and introducing the use of wind, solar, geothermal and other clean renewable resources of energy

Keywords: VECM, Economic Growth, CO₂ Emission, Energy Consumption, Variance, Decomposition