Causal relationship between financial deepening, national security, ecological footprint, and economic growth in Nigeria

Background This study seeks to examine the causal link between financial deepening, national security, ecological footprint, and economic growth in Nigeria, in order to contribute to the contradicting evidence on economic growth drivers. Methods The dynamic ARDL model was employed as the baseline model to establish the link between the phenomena, and the FMOLS and DOLS as robust models using time series data spanning from 1995 to 2022. The FMOLS and DOLS models take into consideration the presence of endogeneity, cross-sectional dependency, and heterogeneity. Results The results demonstrate that whereas ecological footprint has positive and significant long-term relationships with economic growth, financial deepening and national security have negative and significant long-run relationships with economic growth. There was a 34% and 50% correction to the short-term to long-term adjustment speed, respectively. The findings of the Granger causality, interaction terms, marginal (ME), and threshold (TH) effects demonstrate: a) a significant bidirectional causal relationship between national security and economic growth, as well as a one-way significant causal link between financial deepening and economic growth; b) changes in national security and ecological footprint have a significant and negative impact on the financial deepening effect on economic growth; c) significant negative and marginal effects of national security on economic growth, as well as significant positive marginal effects of ecological footprints on economic growth; and d) the impact of financial deepening on economic growth becomes apparent when the increases in the marginal effect of the ecological footprint reach a critical limit over the ( TH CO 2 = 0.981) threshold. Conclusions This study highlights the significant link between Nigeria’s financial deepening, national security, ecological footprint, and economic growth. It recommends that viable policies be put in place to support the development of financial institutions, increasing security infrastructure investment, and promoting renewable energy use for sustainable environment and reduced carbon emissions.