Effect of Climate Change on Economic Growth in Nigeria

Abstract

The research seeks to investigate the climate change effect and the growth of the Nigerian economy, using the model of Autoregressive Distributed Lag
(ARDL) to examine the changes of short-time and long-time period for thirty (30) years (1993–2023). Applying the Endogenous Growth Theory as the
theoretical framework. The short-time period results reveal that fluctuations in climate change indicators, gross capital formation (GCF), foreign direct
investment (FDI), and trade openness (TRO) show inconsistent but significantly impacts on Gross Domestic Product. However, the long-time
period, some of these variables demonstrate non-significantly statistical effect on the growth of the economy, suggesting structural limitations within
Nigeria’s economy that may prevent the full realization of the growth potential of these factors. The Correction in Error Term reveals a slow rate for
equilibrium adjusted, highlighting economy’s gradual response to deviations from long-term trends. Meanwhile, there is confirmation of model robustness
from Diagnostic test, without heteroskedasticity’s evidence and residuals from serial correlation, thus supporting the findings’ reliability. The study concludes
that while climate change, FDI, GCF, and trade openness can influence shortterm growth, their long-term impact is hindered by Nigerian economic and
structural challenges. Based on the results, the research recommends strengthening regulatory frameworks to improve FDI effectiveness, investing
in climate-resilient infrastructure, enhancing the efficiency of capital allocation for productive projects, and diversifying the trade structure to
maximize the benefits of trade openness. These strategic recommendations aim to address underlying structural constraints, thereby supporting Nigeria’s
pathway to sustainable economic growth.