Examining the Links Between Oil Production, Carbon Emissions, and Economic Growth in Nigeria

Abstract

This paper investigates the causal relationships among carbon emissions, oil production, and economic growth in Nigeria using time series data spanning from 1970 to 2020. The study employs an autoregressive distributed lag model and a Granger causality approach to analyze both the effects and causal links between these key variables. The main findings reveal that oil production and carbon emissions exert a significant negative effect on real per capita growth in Nigeria. Additionally, the results establish a significant causal relationship flowing from crude oil production to both carbon emissions and economic growth. This suggests that efforts to accelerate economic growth and improve welfare through increased oil production have inadvertently led to heightened environmental degradation and a decline in the quality of life. Consequently, the potential benefits of Nigeria’s oil resource endowment have been undermined by the adverse environmental and health impacts associated with higher carbon emissions. The implications of these findings are critical, indicating that the negative impacts of oil resources observed in many oil-dependent countries, as reported in previous studies, may indeed be driven by the environmental degradation and health hazards induced by elevated carbon emissions. In the case of Nigeria, the pursuit of economic growth through oil production has resulted in significant environmental costs, calling into question the long-term sustainability of this growth strategy. The study underscores the need for more sustainable approaches to economic development in oil-dependent economies like Nigeria. It highlights the importance of balancing economic growth with environmental protection to ensure that the benefits of natural resource endowments are both seen and felt by the population, rather than being offset by the detrimental effects of environmental degradation.