Nigerian Journal of Banking and Financial Issues (NJBFI)

IMPACT OF GREEN FINANCE ON ECONOMIC GROWTH IN NIGERIA

Abstract

Nowadays, every nation aspires for economic growth, and the most promising way to achieve this goal is through green finance, which is the development of financial operations in harmony with ecological balance and environmental conservation. The study investigated the impact of green financing on economic growth in Nigeria using data spanning from 1990 to 2023 obtained from various issues of CBN Statistical Bulletin and World Bank Pollution Management Data Base 2023. The study used real gross domestic product as the dependent variable while climate change, carbon finance, and green credit were used as independent variables. The data were analyzed using Co-integration and vector autoregressive. Serial Correlation LM Test, Heteroskedasticity and Normality tests were employed to assure the robustness of the model. The Johansen test of co-integration showed absence of long-relationship among the variables. From the short-run ordinary least square result, it was revealed that green credit exhibited a significant positive effect on economic growth of Nigeria while other variables are not significant but directly induced economic growth. Similarly, VAR model indicated that all the variables were directly related to economic growth. Based on this result, the study came to the conclusion that the dynamic financial approach of green financing serves as a strategic tool to lessen the far-reaching effects of these ecological concerns. As a result, suggested the need for institutional quality capable of promoting the country’s ecosystem to enhance economic growth.