Financial development and environmental sustainability in Nigeria: fresh insights from multiple threshold nonlinear ARDL model

Previous studies failed to account for the effects of major, minor and moderate changes in financial development on environmental sustainability in Nigeria. To provide this necessary fresh evidence, the current study applied the recently proposed multiple threshold nonlinear autoregressive distributed lag model for the provision of such information. Quarterly data series from 2000Q1 to 2018Q4 obtained from various data hosts were used for empirical analysis. Evidence from the estimations proves that the MTNARDL models provide more robust outputs than the NARDL. Equally, results from this enhanced framework indicate that the effects of extremely large changes in financial development on environmental sustainability differ significantly from the effects of extremely small changes. Again, the finding reveals that the positive impacts of financial development on environmental sustainability fizzles out at the lower thresholds. Furthermore, stronger asymmetric effects between financial development and CO₂ emissions exist in the long run, as compared with the short run. Therefore, to ensure environmental sustainability and sustainable development in Nigeria, policy makers should pay adequate attention to the long-run dynamics and ensure that financial development level does not degenerate to the lower thresholds where the positive impacts of financial developments fizzle out.