Financing the alternative: renewable energy in the Nigerian economy
by Joseph Ayoola Omojolaibi
International Journal of Environment and Sustainable Development (IJESD), Vol. 15, No. 2, 2016

Abstract: Achieving a diversified and sustainable energy supply for future generations is one of the major challenges for today's policy makers. The feat of the sustainable energy supply requires diversifying energy sources and changing the current dependence on non-renewable and polluting hydrocarbons fuels. This paper examines the role of the financial sector in renewable energy (RE) development in Nigeria. Notwithstanding, RE brings socio-economic and environmental benefits, however, its implementation encounters a number of impediments, especially in Nigeria. One of these impediments is financing: underdeveloped financial sectors are unable to efficiently channel loans to RE energy fabricators. The impact of financial sector development on the use of renewable energy resources is inveterated in dynamic generalised method of moment (GMM) estimations on Nigeria for 1980 to 2008. Financial intermediation, especially commercial banking, has a significant positive effect on the quantity of RE produced, and the impact is remarkably large when we consider non-hydropower RE such as solar, geothermal and biomass. The results of the dynamic GMM estimations are very suggestive of a robust impact of financial sector development - especially commercial bank asset share and private credit share on RE production in Nigeria.

Online publication date: Thu, 05-May-2016

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