Causal Dynamics Between Green Energy, Governance, Financial Inclusion and Economic Growth in Nigeria

Purpose: This study investigates the causal dynamics between green energy, governance, financial inclusion and economic growth in Nigeria. In addition, the study examines the significance of green energy, governance and financial inclusion to economic growth in Nigeria. Design/Methodology/Approach: Data sourced from the World Bank data base and the Central Bank of Nigeria Statistical Bulletin from 1996 to 2019 were used and real gross domestic product (RGDP) was regressed on co2 emissions, greenhouse gas emissions, renewable energy consumptions, corruption control, political stability, number of commercial banks branches and commercial banks loans. The Generalised Method of Moments (GMM) and granger causality test were used for analyses. Findings: Proxies of green energy are found to be not significant; co2 gas emission, renewable energy consumption and green gas emissions have negative effects on real gross domestic product (RGDP). Governance indicators of corruption control has a negative and significant effect and political stability has a positive and a not significant on RGDP, lastly, the indicators of financial inclusion are not significant, commercial banks loan has a negative effect while number of commercial banks branches has a positive effect on RGDP. Real gross domestic product granger causes green gas emission, with other possible pairs, the test is not significant and no causal relationship exists. The causality test overwhelmingly supports the Neutrality hypotheses of no causal relationship between energy and growth. Practical Implications: Deepening financial inclusion increases output as indicated by number of banks branches but the negative effect of commercial banks loans on output may be because of the ever increasing interest rate on commercial loans in Nigeria. Social Implications: A global shift from dirty energy to green energy has become imperative occasioned by the threat of climate change and increased energy usage, green energy is not only cheap it is also inexhaustible furthermore, an effective governance and adequate financial inclusion will facilitate this paradigm shift. Originality and Value: This study contributed to knowledge by introducing financial inclusion and governance as additional independent variables in the model that investigated the effect of green energy on output, the Generalised Method of Moment (GMM) estimator which is most optimal method under the condition of heteroskedasticity was also deployed in the study.