This study investigates the asymmetric dynamic effects of financial development on ecological footprint in Nigeria over the period 1971-2014 using the nonlinear autoregressive distributed lag (NARDL) framework. Ecological footprint in Nigeria is classified into carbon footprint, non-carbon footprint, and total ecological footprint. The results show that in Nigeria, a positive shock in financial development (an increase in financial development) has significant reducing effect on ecological footprint (i.e., improves environmental sustainability) while a negative shock in financial development (a decline in financial development) has significant increasing effect on ecological footprint (i.e., deteriorates environmental sustainability). Asymmetry test shows that a significant difference exists in how negative and positive shocks in financial development impact on carbon footprint and total ecological footprint, but not for non-carbon footprint. On the basis of the total ecological footprint, the adjustment asymmetry from the dynamic multiplier graph shows that the response of ecological footprint to a negative shock in financial development is stronger. Further findings from the analysis show that economic growth, energy consumption, urbanization, and economic globalization are all drivers of environmental sustainability in Nigeria. Overall, the results highlight the need for a deepened financial system, as part of the strategies for achieving sustainable development in Nigeria.
Keywords: Asymmetry; Carbon footprint; Ecological footprint; Environmental sustainability; Financial development; Nigeria; Nonlinear ARDL.