ECONOMIC GROWTH AND ENVIRONMENTAL DEGRADATION IN NIGERIA : DOES INSTITUTIONAL QUALITY STAND SENSIBLY?

Abstract: Based on theory and copious empirical evidence, environmental economists have recognized the dependence of environmental conditions on economic growth. This dependence is well enumerated in the EKC Hypothesis, which asserts that there exists an inverted U-shaped relationship between measured per capita income and measured level environmental quality such that, economic growth initially portends danger to the environment owing to initial economic pressures, which eventually improves beyond certain threshold of growth. During the initial stages of growth, however, environmental conditions arguably could be made impervious to economic pressures when governments take stiffened stance to strengthen institutions and make them more effective. On the strength of the above thoughts, we have attempted in this empirical work to probe into new evidence on the role of institutions in modulating and moderating the gruesome effects of growth on the environment in the context of Nigeria. While pursuing this empirical course, the study, like others drew on theoretical framings of the classic EKC hypothesis and adopted the ARDL methodical procedure to estimate baseline and interaction models. However, unlike previous studies carried out in Nigeria, the current study adopted a broad- based approach by converting and aggregating the three pervasive environmental pollutants (CO2, NO2 and CH4) in Nigeria into single unit of measurement by means of their CO2 equivalent. Given the core of the study, two models- baseline and interaction- have been estimated and examined based on the conventional statistical and econometric criteria. The results from the baseline model led to the conclusion that EKC holds for Nigeria while those from the interaction model revealed that institutions are important in the environmental project as they play significant role in moderating the harmful effect of economic growth on the environment.