Energy Consumption, Economic Growth, and Environmental Trade-Offs in West Africa: Nexus of Foreign Direct Investment
Abstract
Environmental degradation has become a significant concern across the West African region; this study examines the impact of energy consumption, economic growth (GDP), and foreign direct investment (FDI) on environmental degradation measured by CO2 emission in four West African countries: Nigeria, Ghana, Niger, and Mali from 1980 to 2023 with reference to the Environment Kuznets Curve (EKC). Using secondary data from the World Development Indicators, the study employed various econometric techniques. First, it evaluated the stationarity of the variables by means of unit root tests. Long-run connections were then established using panel cointegration tests. While three panel ARDL estimation approaches (PMG, MG, and FE) were used to estimate the models, descriptive statistics provided a summary of the data. Finally, a heterogeneous panel causality study was done to look at causal links between the factors. In the short run, energy consumption and GDP have a notable positive effect on greenhouse gas emissions, according to the results. Although in the long run, energy consumption and FDI have a positive and significant impact, whereas GDP squares representing the inverted U-shaped EKC exert a negative and significant impact, thereby validating the EKC. Furthermore, based on these results, several environmental welfare improvement-related policy suggestions are suggested, including promoting green investment, monitoring and regulating foreign direct investment, fostering sustainable economic growth, and encouraging economic diversification, while encouraging the exploration of alternative economic indicators for future work.
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