Renewable Energy Consumption, Economic Growth and Environmental Sustainability in Nigeria

Abstract

This paper re-examines the Energy-Led Growth Hypothesis and the Environmental Kuznets Curve (EKC) for Nigeria by jointly modelling the relationship between renewable energy consumption, real output, and carbon dioxide (CO2) emissions. The empirical analysis draws on annual series spanning 1990-2025 for contextual description and a quarterly estimation sample covering 2010Q1-2025Q4, a period that brackets Nigeria's most consequential energy-policy reforms, including the Petroleum Industry Act (2021), the Electricity Act (2023), and the 2060 Energy Transition Plan. Using an Auto-regressive Distributed Lag (ARDL) bounds-testing framework, the study estimates a log-linear emissions equation nesting a quadratic income term (to test the EKC), renewable energy consumption, gross fixed capital formation, and the labour force. Augmented Dickey-Fuller tests confirm that all five series are integrated of order one, I(1); the ARDL bounds-testing procedure is nonetheless retained because it remains valid under a uniform I(1) system as well as under mixed orders of integration, and it performs well in small samples. The bounds F-statistic (0.435) lies below the lower critical bound at the 10, 5, and 1 percent levels, so the null hypothesis of no long-run levels relationship cannot be rejected: over the estimation window, emissions, output, and renewable energy consumption do not settle into a stable long-run equilibrium. Short-run dynamics are nonetheless informative and statistically well behaved: emissions are highly persistent, renewable energy consumption carries a significant positive contemporaneous coefficient that reverses sign at one lag, and the labour force shows an analogous sign reversal, while capital formation and output are not significant in the short run. Economically, this pattern is consistent with new renewable capacity running alongside, rather than displacing, legacy fossil-fuel generation, so that its net emissions payoff stays small until older capacity is retired. Post-estimation diagnostics reject neither ARCH effects nor serial correlation, supporting the reliability of the short-run estimates. The absence of a long-run levels relationship is interpreted not as evidence that energy policy is irrelevant to emissions outcomes, but as a symptom of Nigeria's institutional implementation gap: renewable penetration remains too shallow, and too unevenly enforced, to anchor a stable long-run growth–emissions nexus. The paper closes with policy recommendations for deepening renewable integration and strengthening the institutional architecture required to convert short-run energy dynamics into a durable, low-carbon growth path.Keywords: Renewable energy consumption; Economic growth; CO2 emissions; Environmental Kuznets Curve; ARDL bounds testing; NigeriaJEL Classification: Q42 (Alternative Energy Sources); Q43 (Energy and the Macroeconomy); Q56 (Environmental and Sustainable Development); O13 (Economic Development: Agriculture, Natural Resources, Energy, Environment); O55 (Economic Development: Africa); C22 (Time-Series Models: Single Equations)