Financial Inclusion and Green Investment in Nigeria: Evidence from an Autoregressive Distributed Lag Model
Abstract
Nigeria possesses considerable renewable-energy potential but continues to attract inadequate investment into environmentally sustainable activities. Although financial inclusion may improve the mobilization of savings, access to credit and the allocation of financial resources, its contribution to green investment in Nigeria remains insufficiently understood. This study examines the effect of financial inclusion on green investment in Nigeria using annual time-series data covering the period 1994–2024. Green investment is specified as the dependent variable, while financial inclusion is the principal explanatory variable. Inflation, foreign direct investment, interest rate, gross domestic product per capita growth and access to electricity are incorporated as control variables. The study employs the Autoregressive Distributed Lag bounds-testing approach to determine the existence of a long-run relationship and estimate the short-run and long-run effects of the explanatory variables. The bounds-test result confirms the existence of a stable long-run relationship among the variables. The long-run estimates show that financial inclusion has a positive but weakly significant effect on green investment. Specifically, a one-percentage-point increase in financial inclusion is associated with an approximately 0.34 per cent increase in green investment. The error-correction term is negative and statistically significant, indicating that short-run deviations are corrected towards long-run equilibrium. The study concludes that financial inclusion can support green investment in Nigeria, but its contribution remains limited by inadequate green financial products, restricted access to affordable credit and macroeconomic instability. It recommends the integration of green financing objectives into Nigeria’s financial inclusion programmes and the establishment of accessible credit facilities for environmentally sustainable investments.