Measuring the equilibrium relationships among urbanization, output growth, and environmental quality in Nigeria

Abstract

This study investigates the long-run relationship and short-run dynamics among urbanization, output growth, and environmental quality in Nigeria. The study adopts autoregressive distributed lag, bounds test co-integration analysis and the autoregressive integrated moving average with the annual time series dataset for 1990-2021. A long-run equilibrium relationship among urbanization, output growth, and environmental quality is established. Urban population, output growth, per capita GDP, and population growth are all significantly related to CO2 emissions. The study confirms the Environmental Kuznets Curve (EKC) hypothesis on per capita GDP and CO2 emissions in Nigeria. The positive interactive effect of urban population and output growth reduces CO2 emissions just as an increase in per capita GDP in a previous period produces a short-run effect of reducing CO2 emissions. The first-period lagged change in per capita GDP reports a marginal statistically significant negative effect on current CO2 emissions. The study utilizes data on past CO2 emissions to predict how CO2 emissions might evolve in the coming years and to examine the environmental sustainability of Nigeria. The forecast of CO2 emissions for 2023-2030 are relatively stable with some marginal fluctuations, which confirm the validated EKC. To sustain the validated inverted U-shaped EKC and to avoid it assuming an N-shape in the future, this study recommends environmental policy focus to monitor the growth of large cities and to implement measures capable of mitigating CO2 emissions by decoupling economic growth from CO2 emissions; and by encouraging investment in clean energy sources, sustainable transportation, and industrial practices. JEL Classification E23 . O44 . O33 . Q28 . Q56 . R11