Assessing Financial-Energy-Growth Dynamics: Evidence from Nigeria's Developmental Experience

Abstract

Purpose: This study investigates the influence of energy consumption and financial system development on Nigeria's economic growth, focusing on sustainable relationships aligned with the United Nations’ SDG-7. Design/Methodology/Approach: Annual time series data from 1990–2021, sourced from World Development Indicators and the International Energy Agency, were analysed using the Toda and Yamamoto (1995) Granger non-causality approach to capture potential asymmetric causalities among economic growth, energy consumption, and financial system development. Findings: The results reveal asymmetric causal relationships. Economic growth unidirectionally influences positive shocks in energy consumption, while negative changes in energy consumption negatively affect financial system development. Additionally, there is bidirectional causality between negative shocks to economic growth and positive changes in financial system development. Research Limitation: The study is confined to Nigeria and annual data, which may limit the capture of short-term dynamics or cross-country insights. Future research could use panel or sectoral data for broader generalisability. Practical Implication: Policymakers can leverage financial system development to influence energy consumption, supporting sustainable economic growth and energy policy design. Social Implication: Integrating energy and financial sector policies can enhance sustainable development, ensure affordable energy access and improve economic welfare. Originality/Value: The study highlights novel asymmetric causal links among economic growth, energy consumption, and financial system development, providing evidence-based guidance for sustainable policy formulation in Nigeria.