Green Financing and Economic Sustainability in Nigeria: Assessing the Impact of Green Credit, Green Securities, and Carbon Finance

Abstract

Economic sustainability is a fundamental pillar of a country's growth and development, yet it faces several challenges, including green credit, security, and carbon finance. This study examines the impact of green financing on Nigeria’s economic sustainability from 2009 to 2023. Specifically, it evaluates the effects of green credit, green security, and carbon finance on Nigeria’s economic stability. The study employs descriptive and inferential statistical methods, including unit root tests, co-integration tests, panel cointegration analysis, and panel cointegration regression estimation. Additionally, a dynamic fixed-effect model is used to assess the impact of green financing on economic sustainability. The findings indicate that carbon finance (CO2F) and electricity production from hydroelectric sources (EPH) have negative predictive values for GDP growth (GDPG), implying a negative impact. In contrast, green loans (GRL) exhibit a positive predictive value, suggesting a beneficial effect on economic sustainability. This is further reinforced by an R-squared value of 0.8279, indicating that green financing variables collectively influence GDPG by approximately 83%. The model derived from this study is represented as GDPG = -2.485 - 4.68E-11(CO2F) + 0.698(GRL) - 7.10E-05(EPH). The study concludes that green credit, security, and carbon finance significantly impact Nigeria's economic sustainability. Based on these findings, it is recommended that Nigeria substantially increase investment in research and development (R&D) in clean energy technologies while developing local expertise in renewable energy solutions. Such efforts are crucial to addressing current climate challenges, achieving renewable energy targets, and ensuring long-term economic resilience.