Asymmetric Effects of Economic Growth on Green Investment in Nigeria and the Role of Institutional Quality: Evidence from a Nonlinear ARDL Approach
DOI:
https://doi.org/10.64229/fdq3jd10Keywords:
Green investment, Nonlinear ARDL, Asymmetric effects, Institutional quality, Economic growth, Nigeria; Ecological footprintAbstract
Nigeria’s green transition is constrained by a persistent climate-financing gap and governance weaknesses, yet the joint influence of macroeconomic performance and institutional quality on green investment remains poorly understood in this setting. This study examines the asymmetric effects of economic growth and institutional quality on green investment in Nigeria over 2000-2024 using a Nonlinear Autoregressive Distributed Lag (NARDL) model, controlling for carbon emissions, ecological footprint, and innovation. Cointegration is established via both asymptotic and McNown-Sam-Goh bootstrap bounds tests. Formal Wald tests confirm that green investment responds asymmetrically to shocks in economic growth and carbon emissions. Positive growth shocks raise green investment substantially more than equivalent negative shocks reduce it, consistent with a ratchet-type pattern where committed green projects resist unwinding during downturns. Institutional quality and innovation are positively associated with green investment over the long run, while a rising ecological footprint correlates with a decline, reflecting fossil-fuel dependence crowding out cleaner alternatives. Approximately 68% of short-run disequilibria are correct within a year, indicating a fast return to equilibrium. Robustness checks under parsimonious lag structures confirm the stability of these asymmetries. The findings suggest that accelerating green investment in Nigeria requires targeted governance reforms and counter-cyclical financing mechanisms to sustain green capital flows through economic downturns.
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Copyright (c) 2026 Dungrit Peter Gelle, Yahaya Murotshak Komo, Yitmal Yahaya Mari (Author)
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