Effects of Industrialization on Business and Economic Climate in Nigeria: Evidence from Sectoral Analysis

Abstract

This study assessed the dynamics of industrialization in Nigeria from 1999 to 2022 and the ripple effect on environmental quality, business and the economic landscape. This study anchors on the United Nations’ Sustainable Development Goals to assess the interactive effect of industrialization on sectoral value addition while also considering its implications for clean energy, economic growth, innovation and climate change in Nigeria. The autoregressive distributed lag model was employed for its capability to incorporate variables of diverse orders of integration and assess the short- and long-run dynamics of industrialization and its impact on various facets of Nigeria’s economy, business sector and environmental quality. The data set was sourced and collated from the World Bank Development Index. The findings reveal a positive and significant relationship between industrialization and economic growth. The positive nexus is propelled by private sector credit specifically geared towards business development and the pivotal role of net foreign direct investment, for economic expansion alongside industrial activities. Exchange rate volatility limits access to reliable energy sources and impedes sectoral additions. The effect of industrialization on environmental quality stems from heavy reliance on fossil fuels. This study advocates for strategic investments in sustainable and renewable energy sources, adoption of climate-smart agricultural practices and implementation of stringent environmental quality guidelines. To address the dual challenge of fostering economic growth through industrialization, ensuring environmental sustainability and offering valuable insights for policymakers and stakeholders in Nigeria’s development trajectory.