An Analytical Assessment on the Impact of Fiscal Policy and Environmental Degradation in Nigeria

This study examines the nexus between fiscal policy and environmental degradation by moderating the effect of energy consumption in Nigeria. The data covered from 1981 until 2021 which was analysed using a Nonlinear Autoregressive Distributive Lag (NARDL) and Diks-Panchenko causality model. The empirical findings reveal that positive and negative shock in government tax has a negative and positive impact on 𝐶𝑂2 emissions, respectively. Similarly, the positive shock in government expenditure enhances environmental degradation. However, the impact of moderating factor (energy consumption) has a positive relationship with 𝐶𝑂2 emissions and it confirmed energy consumption as major causes of anthropogenic 𝐶𝑂2 emission in Nigeria. Moreover, the nonparametric causality model reveals bidirectional causality between government expenditure and environmental degradation, whereas government tax and environmental degradation, energy consumption and environmental degradation has a unidirectional causality. Thus, the fiscal policy remains essential instruments for promoting environmental quality in Nigeria. This suggests that environmental taxes and government expenditures should be proposed by the Government to mitigate environmental degradation and by enhancing a lower carbon production technologies that are environmentally-friendly in Nigeria.