Abstract
Abstract
This study investigates the role of green and climate finance in promoting sustainable development in Nigeria, focusing on their scale, structure, trends, and empirical effects. Using annual data covering 1990–2023, the paper applies the Autoregressive Distributed Lag (ARDL) model to examine both the short-run and long-run dynamics between the Sustainable Development Index (SDI) and key explanatory variables - Green Finance Index (GFI), Climate Finance (CF), Foreign Direct Investment inflows (FDI_IN), Inflation (INF), and Domestic Credit to the Private Sector (DC_PS). Descriptive statistics, correlation analysis, and diagnostic stability tests complement the econometric analysis. Results show that both green finance and climate finance exert positive and significant long-run effects on sustainable development in Nigeria, confirming the study’s hypothesis. In the short run, green finance maintains a positive but marginal effect, while climate finance initially exerts a negative influence, likely due to transitional implementation costs and institutional inefficiencies. Control variables reveal mixed outcomes: FDI inflows negatively influence sustainability in the short run, inflation undermines stability, whereas domestic credit expansion supports sustainable growth. The error-correction term indicates rapid adjustment to long-run equilibrium, and diagnostic tests confirm model reliability. The study concludes that although green and climate finance are key catalysts for sustainability, their current scale and structure remain inadequate to meet Nigeria’s climate and development goals. Policy recommendations emphasize strengthening institutional coordination, diversifying financing instruments, expanding private-sector participation, and enhancing transparency and monitoring frameworks to close the financing gap and accelerate progress toward the country’s 2030 and 2060 climate targets.