The Role of Trade Openness, Financial Development and Institutional Quality in the Environmental Performance of a Developing Country: Evidence from Nigeria

Abstract

The natural resources of Nigeria face rising threats from deforestation and pollution and resource extraction and land degradation. Climate change makes these problems worse which demonstrates the critical need to enhance environmental quality for sustainable development. The identification of factors that influence environmental performance stands as essential to stop additional resource depletion.  The research analyses how economic growth together with population growth alongside trade openness and financial development and governance affect environmental performance in Nigeria. The ARDL model applied to annual data from 1995 to 2022 shows economic growth together with trade openness produce substantial environmental performance benefits in the short term. Financial development produces positive effects on environmental performance, but the results lack statistical significance. The positive effects of institutional quality on environmental performance appear over time thus demonstrating the requirement for enhanced governance systems to obtain stable environmental results. Environmental performance experiences negative effects in the short term from population growth. The results show that long-term environmental performance benefits from both financial development and institutional quality improvements. Environmental performance faces substantial negative consequences because of economic growth.  Nigeria needs to develop its financial sector together with institutional frameworks while controlling population growth to achieve sustainable environmental outcomes.