The Dilemma of Minerals Dependent Economy: The case of Foreign Direct Investment and Pollution in Nigeria

This study empirically investigates the causal relationship between mineral exploration and environmental pollution in Nigeria with specific focus on natural gas and crude oil in Niger Delta region. The model of Granger causality tests was used. Quarterly data covering 2008 and 2009 were used in accordance with the Akaike (1976) minimum lag length for time-series analysis. The ADF unit root tests show that the null hypothesis of unit root is rejected and, the KPSS stationarity test result accepts the null hypothesis of "stationarity" implying that the variables are fit for the purpose of Granger causality analysis. The test for cointegration show that the variables are cointegrated at the trace level; this imply that gas flaring, environmental pollution and foreign direct investment are statistically linked. The regression on the ordinary least square illustrates that the impact of oil and natural gas exploration on the Nigerian environment is persistent in the long-run. The Granger-causality test result shows that there is one-way causality flowing from the flaring of gas by the foreign firms to the environmental pollution in Nigeria. The study finds a long-run uni-directional causal relationship flowing from mineral exploration to air, soil and water pollution.