Financial Development, Energy Consumption, Digitalization, and Carbon Emissions in Nigeria

By: Madukwe, Chiedozie Chidiebere & Arodoye, Nosakhare Liberty

Pages: 202–221, Volume: 3, Number: 2

Published by: AEFUNAI Journal of Economics, Finance and Development Studies, Alex Ekwueme Federal University, Ndufu-Alike, 8/1/2026, 2026

ISSN (Electronic): 2536-6742

DOI:

Financial Development, Energy Consumption, Digitalization, and Carbon Emissions in Nigeria

Abstract:

The key role digitalization plays in reshaping the relationship between financial development, energy consumption, and carbon emissions in Nigeria from 1990 to 2023 is examined. While previous studies investigated the independent relationship between these variables, limited evidence exists in developing economies on the moderating role of digitalization. Three complementary models are estimated employing the autoregressive distributed lag methodology to examine the direct impacts of financial development and energy consumption, digitalization’s independent contribution, and its moderating influence on the finance-energy-environment nexus. The findings reveal mixed environmental effects of financial development, where it is emissions-reducing in the short run but displays an insignificant long-run impact. Fossil fuel consumption is significantly emissions-promoting, whereas renewable energy consumption limits emissions, contributing to improved environmental outcomes. While digitalization displays no significant long-run direct effect on emissions, its moderating role is crucial as it amplifies the environmental degradation role associated with fossil fuel consumption, revealing a digitization-emission trap. Likewise, promoting the emissions-limiting effect of renewable energy consumption. The results also demonstrate that economic growth contributes to lower emissions in the long run. The finance-energy-environment literature is extended by demonstrating how digitalization functions beyond merely being an independent determinant of environmental quality but also functions as a critical conditioning mechanism. The findings emphasize the need to integrate green finance, renewable energy, and sustainable digital infrastructure to facilitate Nigeria’s transition to a low-carbon economy.

Keywords: Financial Development, Digitalization, Renewable Energy, Carbon Emissions, Nigeria