Testing the ’’Pollution Havens Hypothesis (PHH)’’ in Nigeria from 1970-2013

Abstract

Economic integration is a way of increasing World output of oil and gas production based on the economies of scale property and exchange of technology, ideas and information. Two major channels through which integration contributes to growth in the literature have been identified as trade and foreign direct investment. Recently, various integration proposals have been advanced for Africa, but the efficacy of integration on growth in Africa is far from being established. Again, since economic growth is not totally divorced from environmental conditions, we explored the contributions of trade liberalization and foreign direct investment inflows on growth in Nigeria and the implications of integration on the Nigerian environment by using the Autoregressive Distributed Lag (ARDL) approach. Annual time series data is employed for the period spanning 1970-2013. The results which emanated from the findings depict that there was none existence of a long run relationship between FDI and growth on the one hand while there exists a long run causal link between CO2 per capita (a measure of environmental quality) and FDI inflows on the other hand. Also, we found that economic growth and foreign direct investment into Nigeria significantly fuelled pollution while trade is beneficial both in the short and long run. We recommend provision of infrastructure, initiation and enforcement of sound environmental policy among others to enable integration to make meaningful impact in developing countries generally. The policy lessons from these findings are that any policy that will aim at attracting foreign direct investment inflow should be one that will encourage and promote the adoption of cleaner production technologies.

DOI: 10.5901/mjss.2014.v5n23p598