Acta Universitatis Danubius. Œconomica, Vol. 15, No. 1 - 4
Abstract
The study investigates the link between financial development, investment and energy consumption in Nigeria. The aim
of the study is to re-examine financial development and energy consumption model by considering investment as a factor that
contributes to more energy demand for consumption. The study employs an annual data within the period 1981 and 2015. The
Auto-regressive Distributed Lag (ARDL) Method is used to analyse the data. From the results, financial development had a negative
impact on energy consumption both in the short-run and the long-run. Investment has a positive significant impact on energy
consumption in the short-run, while it was significantly negative in the long-run. GDP in the long-run and short-run positively
relates with energy consumption. Population growth rate in the short-run negative impact on energy consumption, while in the
long-run was positive. The findings propel the conclusion that financial development and investment are an important determinant
of energy consumption in Nigeria and government should consider a policy that incorporate credit availability on energy issues
into its plan.
References
Ali, HS.; Yusop, Z.B. & Hook, L.S. (2015). Financial Development and Energy Consumption Nexus in Nigeria: An Application
of Autoregressive Distributed Lag Bound Testing Approach. International Journal of Energy Economics and Policy. 5(3), pp. 816-
821. http://dergipark.gov.tr/download/article-file/361547.
Al-Mulali, U. & Lee, Janice, Y.M. (2013). Estimating the impact of the financial development on energy consumption: Evidence
from the GCC (Gulf Cooperation Council) countries. Energy, 60(2013), pp. 215-221. DOI:10.1016/j.energy.2013.07.067
Aslan, A.; Apergis, N. & Topcu, M. (2014). Banking development and energy consumption: Evidence from a panel of Middle
Eastern countries. Energy. pp. 1-7. http://dx.doi.org/10.1016/j.energy.2014.05.061.
Bekhet, H.A.; Matar, A. & Yasmin, T. (2017). CO2 emissions, energy consumption, economic growth, and financial development
in GCC countries: Dynamic simultaneous equation models. Renewable and Sustainable Energy Reviews. 70, pp. 117-132. DOI:
10.1016/j.rser.2016.11.089.
Chang, S.C. (2015). Effects of financial developments and income on energy consumption. International Review of Economics and
Finance. 35 (2015), pp. 28–44. http://dx.doi.org/10.1016/j.iref.2014.08.011.
Coban, S. & Topcu, M. (2013). The nexus between financial development and energy consumption in the EU: A dynamic panel
data analysis. Energy Economics. 39(2013), pp. 81-88. DOI: 10.1016/j.eneco.2013.04.001.
Dan, Y. & Lijun, Z. (2009). Financial development and energy consumption: an empirical research based on Guangdong Province.
Paper presented at International Conference on Information Management, Innovation Management and Industrial Engineering,
ICIII, 3, pp. 102-105.
Frankel, J. & Romer, D. (1999). Does trade cause growth? The American Economic Review, 89(3), pp. 379–399.
Frankel, Jeffrey A. & David, Romer (1999). Does Trade Cause Growth? American Economic Review. 89, pp. 379-399.
Fuinhas, J.A. & Marques, A.C. (2012). Energy consumption and economic growth nexus in Portugal, Italy, Greece, Spain and
Turkey: An ARDL bounds test approach (1965–2009). Energy Economics. 34(2), pp. 511-517. doi:10.1016/j.eneco.2011.10.003.
Fung H.K. (2009). Financial development and economic growth: convergence or divergence?. Journal of International Money and
Finance, 28, pp. 56–67. https://doi.org/10.1016/j.jimonfin.2008.08.001.
Furuoka, F. (2015). Electricity consumption and economic development in Asia: new data and new methods. Asian-Pacific
Economic Literature. 29(1), pp. 102-125. RePEc:bla:apacel:v:29:y:2015:i:1, pp. 102-12.
Goldsmith, R. (1969). Financial structure and development. New York: Yale University Press.
Islam, F.; Shabhaz, M.; Ahmed, A.U. & Alam, Md. M. (2013). Financial development and energy consumption nexus in Malaysia:
A multivariate time series analysis. Economic Modelling, 30(2013), pp. 435-441. https://doi.org/10.1016/j.econmod.2012.09.033
Jalil, A. & Feridun, M. (2011). The impact of growth, energy and financial development on the environment in China: A
cointegration analysis. Energy Economics. 33(2011), pp. 284-291. https://doi.org/10.1016/j.eneco.2010.10.003.
Jensen, V. (1996). The pollution haven hypothesis and the industrial flight hypothesis: some perspectives on theory and empirics.
Working Paper 1996.5, Centre for Development and the Environment, University of Oslo.
Karanfil, F. (2009) How many times again will we examine the energy-income nexus using a limited range of traditional
econometric tools? Energy Policy, 37(4), pp. 1191–1194. https://doi.org/10.1016/j.enpol.2008.11.029.
Komal, R. & Abbas, F. (2015). Linking financial development, economic growth and energy consumption in Pakistan. Renewable
and Sustainable Energy Reviews. 44(2015), pp. 211–220. https://doi.org/10.1016/j.rser.2014.12.015.
Kuznets, S. (1955). Economic Growth and Income Inequality. America Economic Review. 45(1), 1-28.
https://www.jstor.org/stable/1811581.
Mahalik, M.K.; Babu, M.S.; Nanthakumar, L. & Shahbaz, M. (2017). Does financial development intensify energy consumption
in Saudi Arabia? Renewable and Sustainable Energy Reviews. 75(2017), pp. 1022-1034.
http://dx.doi.org/10.1016/j.rser.2016.11.081.
McKinnon R. (1973). Money and capital in economic development. Washington, DC: Brookings Institution.
Mielnik, O. & Goldemberg, J. (2002). Foreign direct investment and decoupling between energy and gross domestic product in
developing countries. Energy Policy, 30 (2), pp. 87-89. https://doi.org/10.1016/S0301-4215(01)00080-5.
Odusanya, I.A.; Osisanwo, B.G. & Tijani, J.O. (2016). Financial Development and Energy Consumption Nexus in Nigeria.
OECONOMICA, 12(5), pp. 155-165.
Ozturk, I., and Acaravci, A., (2013). The long-run and causal analysis of energy, growth, openness and financial development on
carbon emissions in Turkey. Energy Economics. 36, pp. 262-267. https://doi.org/10.1016/j.eneco.2012.08.025
Ozturk, I. & Al-Mulali, U. (2015). Natural gas consumption and economic growth nexus: Panel data analysis for GCC countries.
Renewable and Sustainable Energy Reviews, 51, pp. 998-1003. https://doi.org/10.1016/j.rser.2015.07.005.
Rafindadi, A.A. & Ozturk, I. (2016). Effects of financial development, economic growth and trade on electricity consumption:
Evidence from post-Fukushima Japan. Renewable and Sustainable Energy Reviews, 54(2016), pp. 1073-1084.
https://doi.org/10.1016/j.rser.2015.10.023.
Sadorsky, P. (2010). The impact of financial development on energy consumption in emerging economies. Energy Policy, 38(5),
pp. 2528–2535. https://doi.org/10.1016/j.enpol.2009.12.048.
Sardosky, P. (2011). Financial development and energy consumption in Central and Eastern European frontier economies. Energy
Policy, 39(2), pp. 999-1006. https://doi.org/10.1016/j.enpol.2010.11.034.
Schumpeter, J. (1932). The theory of economic development. Cambridge, MA, US: Harvard University Press.
Shahbaz, M.; Khan, S. &d Tahir, M.I. (2013). The dynamic links between energy consumption, economic growth, financial
development and trade in China: Fresh evidence from multivariate framework analysis. Energy Economics, 40 (2013), pp. 8-21.
https://doi.org/10.1016/j.eneco.2013.06.006.
Shahbaz, M.; VanHoang, T.H.; Mahalik, M.K. & Roubaud, D. (2017). Energy consumption, financial development and economic
growth in India: New evidence from a nonlinear and asymmetric analysis. Energy Economics, 63, pp. 199-212.
https://doi.org/10.1016/j.eneco.2017.01.023.
Shaw E. (1973). Financial deepening in economic development. New York: Oxford University Press.
of Autoregressive Distributed Lag Bound Testing Approach. International Journal of Energy Economics and Policy. 5(3), pp. 816-
821. http://dergipark.gov.tr/download/article-file/361547.
Al-Mulali, U. & Lee, Janice, Y.M. (2013). Estimating the impact of the financial development on energy consumption: Evidence
from the GCC (Gulf Cooperation Council) countries. Energy, 60(2013), pp. 215-221. DOI:10.1016/j.energy.2013.07.067
Aslan, A.; Apergis, N. & Topcu, M. (2014). Banking development and energy consumption: Evidence from a panel of Middle
Eastern countries. Energy. pp. 1-7. http://dx.doi.org/10.1016/j.energy.2014.05.061.
Bekhet, H.A.; Matar, A. & Yasmin, T. (2017). CO2 emissions, energy consumption, economic growth, and financial development
in GCC countries: Dynamic simultaneous equation models. Renewable and Sustainable Energy Reviews. 70, pp. 117-132. DOI:
10.1016/j.rser.2016.11.089.
Chang, S.C. (2015). Effects of financial developments and income on energy consumption. International Review of Economics and
Finance. 35 (2015), pp. 28–44. http://dx.doi.org/10.1016/j.iref.2014.08.011.
Coban, S. & Topcu, M. (2013). The nexus between financial development and energy consumption in the EU: A dynamic panel
data analysis. Energy Economics. 39(2013), pp. 81-88. DOI: 10.1016/j.eneco.2013.04.001.
Dan, Y. & Lijun, Z. (2009). Financial development and energy consumption: an empirical research based on Guangdong Province.
Paper presented at International Conference on Information Management, Innovation Management and Industrial Engineering,
ICIII, 3, pp. 102-105.
Frankel, J. & Romer, D. (1999). Does trade cause growth? The American Economic Review, 89(3), pp. 379–399.
Frankel, Jeffrey A. & David, Romer (1999). Does Trade Cause Growth? American Economic Review. 89, pp. 379-399.
Fuinhas, J.A. & Marques, A.C. (2012). Energy consumption and economic growth nexus in Portugal, Italy, Greece, Spain and
Turkey: An ARDL bounds test approach (1965–2009). Energy Economics. 34(2), pp. 511-517. doi:10.1016/j.eneco.2011.10.003.
Fung H.K. (2009). Financial development and economic growth: convergence or divergence?. Journal of International Money and
Finance, 28, pp. 56–67. https://doi.org/10.1016/j.jimonfin.2008.08.001.
Furuoka, F. (2015). Electricity consumption and economic development in Asia: new data and new methods. Asian-Pacific
Economic Literature. 29(1), pp. 102-125. RePEc:bla:apacel:v:29:y:2015:i:1, pp. 102-12.
Goldsmith, R. (1969). Financial structure and development. New York: Yale University Press.
Islam, F.; Shabhaz, M.; Ahmed, A.U. & Alam, Md. M. (2013). Financial development and energy consumption nexus in Malaysia:
A multivariate time series analysis. Economic Modelling, 30(2013), pp. 435-441. https://doi.org/10.1016/j.econmod.2012.09.033
Jalil, A. & Feridun, M. (2011). The impact of growth, energy and financial development on the environment in China: A
cointegration analysis. Energy Economics. 33(2011), pp. 284-291. https://doi.org/10.1016/j.eneco.2010.10.003.
Jensen, V. (1996). The pollution haven hypothesis and the industrial flight hypothesis: some perspectives on theory and empirics.
Working Paper 1996.5, Centre for Development and the Environment, University of Oslo.
Karanfil, F. (2009) How many times again will we examine the energy-income nexus using a limited range of traditional
econometric tools? Energy Policy, 37(4), pp. 1191–1194. https://doi.org/10.1016/j.enpol.2008.11.029.
Komal, R. & Abbas, F. (2015). Linking financial development, economic growth and energy consumption in Pakistan. Renewable
and Sustainable Energy Reviews. 44(2015), pp. 211–220. https://doi.org/10.1016/j.rser.2014.12.015.
Kuznets, S. (1955). Economic Growth and Income Inequality. America Economic Review. 45(1), 1-28.
https://www.jstor.org/stable/1811581.
Mahalik, M.K.; Babu, M.S.; Nanthakumar, L. & Shahbaz, M. (2017). Does financial development intensify energy consumption
in Saudi Arabia? Renewable and Sustainable Energy Reviews. 75(2017), pp. 1022-1034.
http://dx.doi.org/10.1016/j.rser.2016.11.081.
McKinnon R. (1973). Money and capital in economic development. Washington, DC: Brookings Institution.
Mielnik, O. & Goldemberg, J. (2002). Foreign direct investment and decoupling between energy and gross domestic product in
developing countries. Energy Policy, 30 (2), pp. 87-89. https://doi.org/10.1016/S0301-4215(01)00080-5.
Odusanya, I.A.; Osisanwo, B.G. & Tijani, J.O. (2016). Financial Development and Energy Consumption Nexus in Nigeria.
OECONOMICA, 12(5), pp. 155-165.
Ozturk, I., and Acaravci, A., (2013). The long-run and causal analysis of energy, growth, openness and financial development on
carbon emissions in Turkey. Energy Economics. 36, pp. 262-267. https://doi.org/10.1016/j.eneco.2012.08.025
Ozturk, I. & Al-Mulali, U. (2015). Natural gas consumption and economic growth nexus: Panel data analysis for GCC countries.
Renewable and Sustainable Energy Reviews, 51, pp. 998-1003. https://doi.org/10.1016/j.rser.2015.07.005.
Rafindadi, A.A. & Ozturk, I. (2016). Effects of financial development, economic growth and trade on electricity consumption:
Evidence from post-Fukushima Japan. Renewable and Sustainable Energy Reviews, 54(2016), pp. 1073-1084.
https://doi.org/10.1016/j.rser.2015.10.023.
Sadorsky, P. (2010). The impact of financial development on energy consumption in emerging economies. Energy Policy, 38(5),
pp. 2528–2535. https://doi.org/10.1016/j.enpol.2009.12.048.
Sardosky, P. (2011). Financial development and energy consumption in Central and Eastern European frontier economies. Energy
Policy, 39(2), pp. 999-1006. https://doi.org/10.1016/j.enpol.2010.11.034.
Schumpeter, J. (1932). The theory of economic development. Cambridge, MA, US: Harvard University Press.
Shahbaz, M.; Khan, S. &d Tahir, M.I. (2013). The dynamic links between energy consumption, economic growth, financial
development and trade in China: Fresh evidence from multivariate framework analysis. Energy Economics, 40 (2013), pp. 8-21.
https://doi.org/10.1016/j.eneco.2013.06.006.
Shahbaz, M.; VanHoang, T.H.; Mahalik, M.K. & Roubaud, D. (2017). Energy consumption, financial development and economic
growth in India: New evidence from a nonlinear and asymmetric analysis. Energy Economics, 63, pp. 199-212.
https://doi.org/10.1016/j.eneco.2017.01.023.
Shaw E. (1973). Financial deepening in economic development. New York: Oxford University Press.
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Published
2021-06-28
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Collective Authors. (2021). Acta Universitatis Danubius. Œconomica, Vol. 15, No. 1 - 4: Array. Acta Universitatis Danubius. Œconomica, 15(1). Retrieved from https://dj.univ-danubius.ro/index.php/AUDOE/article/view/1199
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