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

2.1 Financial deepening and economic growth

The conventional neoclassical paradigm posits that economic development is propelled by an integrated financial system, as argued by Henry (2006). According to this perspective, the financial system plays a crucial role in promoting economic growth by stimulating domestic consumption, leading to higher savings and consequently reducing capital expenses. Another perspective emphasizes that the financial system drives economic expansion through indirect mechanisms. Correspondingly, an accessible financial system fosters economic growth by facilitating an upswing in financial services, thereby stimulating the economy (King and Levine, 1993). In this context, Ndako (2017) discovered a long-term correlation between investment, development of finance, and growth in Nigeria. In this context, Paul (2017) explored the enduring impact of finance strengthening on growth. Yahaya and Kolapo (2020) assert that the banking industry is connected to the rise of finance, which in turn has a significant effect on growth. Conversely, Nguyen et al. (2019) contended that the influence of the financial system on growth is contingent upon the degree of development. According to Yang (2019), the financial development of middle-income nations promotes growth. Anachedo and Osakwe (2023) looked at how financial depth affected economic expansion between 1985 and 2021. The analysis also demonstrated a strong adverse correlation between the broad money ratio, insurance industry premiums, and economic expansion. Further information reveals a positive relationship between growth and the market value ratio as well as a connection between Nigeria’s increasing economic growth rates and an increase in loans to the private sector. Additionally, Afzal et al. (2023) discovered a bidirectional causal relationship between financial liquidity and Poland’s economic growth, both in the long and short terms.

In growing African countries, Manasseh et al. (2024) discovered a bidirectional causal association between trade openness, GDP per capita, money supply ratio, and domestic lending to the private sector. Additionally, Okafor et al. (2021) also showed that financial depth has a positive impact on economic growth. Kerimov (2021) investigated the underpinnings of the connection between financial depth and economic advancement using data from 2008 to 2019. According to the study’s findings, bank loan negatively affects GDP-based economic growth. Akintola, Oji-Okoro, and Itodo (2020) found that the long-term development of real production growth is positively and significantly impacted by the strengthening of finance, bank liquidity, and all share indexes. According Kapaya’s (2020) research, there is a short-term positive correlation between financial depth and economic growth, but a long-term negative correlation between financial system efficiency and economic growth.

2.2 National security and economic growth

Defense, or national security, of a sovereign state, comprising its institutions, people, and economy, is considered the responsibility of the government. Governments employ a variety of strategies, such as diplomatic relations and their combined military, economic, and political might, to maintain a nation’s security. Research has also been done on the connection between different security measures and other macroeconomic indicators, and the results demonstrate that a nation’s ability to maintain peace is crucial to its ability to flourish. Because of this, Saleem et al. (2020) found a long-term negative correlation between investment and terrorism in Southern Asia, while Edeme and Nkalu (2019) concluded that terrorism is the reason behind Nigeria’s poor economic gain. Mehmet (2017) discovered that most countries’ economic growth was negatively impacted by terrorist acts, particularly those with low incomes. Research by Saba (2020), Chuk et al. (2017), Bezi et al. (2016), Zakaria et al. (2019), and Saba and Ngepah (2021) shows that terrorist activity makes businesses more vulnerable and hinders their potential to thrive. Further evidence show that economic growth is driven by security outcomes in six regional economic groups. The study also revealed that military spending has a significant influence on industrialization in AMU, CEN-SAD, IGAD, and SADC, while it is insignificant and inversely associated with economic growth in COMESA, ECCAS, and ECOWAS. Consequently, military spending, and industrialization have a long run association.

Yusuf and Mohd (2023), Ngepah and Djemo (2019), Saba (2021), Saba (2020), Saba (2019), Kabiru et al. (2023), and Aminu et al. (2023) investigate the following subjects: The degree of alignment between military spending and security implications for 34 African nations between 1990 and 2015; and the link between military expenditure and security results for 51 African countries between 2000 and 2018. These studies’ findings demonstrated that: a) different security approaches, methods, or actions produce the same or similar results throughout Africa; b) military spending has a significant negative impact on growth in the continent; c) there is no evidence or support for the hypothesis that higher military spending causes economic growth or aligns economic outcomes in Africa; d) military expenditures and their ensuing security effects differ from nation to nation with different effects on economic growth in Africa; e) the increasing level of insecurity in Nigeria has a negative impact on the economy; and f) terrorism hinders economic growth, respectively.

2.3 Ecological footprints and economic growth

Recent study has found that ecological footprints are increasingly influencing economic factors. According to some research, it hinders the growth of economic indicators, while other studies believe it has a favourable influence on them. For example, Yang et al. (2021) observed that the ecological footprint of the BICS economies increased GDP. Also, Ullah et al. (2021) found a significant association across all regimes when they examined the link between GDP and ecological footprint in the top fifteen clean energy economies. The amount of energy derived from biomass and the ecological footprint were shown to be significantly correlated by Wang et al. (2020). Mehmood et al.’s (2023) research on the link between environmental footprints and economic expansion in South Asia revealed a bidirectional causal association between the use of renewable energy and environmental footprints in G7 countries, as well as a causal feedback connection between GDP and the environmental footprints. Additionally, Udemba’s (2020) work demonstrates that Nigeria’s ecological footprint and economic growth are growing at the same time. Further evidence from the ARDL findings indicates a positive link between carbon emissions and economic growth; however, when the country’s income and demographic were also taken into account, a negative link was shown between carbon emissions and growth.

In contrast to past study that indicated a direct association, Ansari et al. (2021) and Obayagbona (2023) revealed an inverse connection between ecological footprints and economic growth. Ansari et al. (2021) also show that the influence of the ecological footprint on economic growth is diminished by globalization. In a similar vein, Ahmad et al. (2020) said that technological progress makes it possible to reduce the impact of the ecological footprint on growth. Furthermore, a study conducted by Obayagbona (2023) examined the link between carbon dioxide emissions and economic growth in Ghana and Nigeria. The findings indicated that ecological footprints indicators, such as GHG emissions and the use of renewable energy, enjoyed a substantial adverse effect on economic expansion in Ghana and Nigeria, while other control variables, such as openness to commerce and the use of electricity, displayed a negligible positive and negative link with economic growth, respectively.

3.1 Description of data

This study spanned the period 1995 – 2022. The study’s period was determined by data reliability and accessibility. The primary goal of the study was to evaluate the causal links between Nigeria’s financial deepening, national security, ecological footprint, and economic growth. Table 1 shows the study’s data, definition of acronym, and data repository links (sources).

3.2 Model specifications

Utilizing yearly time series data from 1995 to 2022, this study used the dynamic autoregressive distributed lag approach (ARDL) created by Pesaran et al. (2001) as the baseline model to estimate the causal relationship between financial deepening, national security, ecological footprints, and economic growth in Nigeria. The output of the baseline model was carefully tested using fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) models, taking into account the limitation of the ARDL model and the expected impacts. Endogeneity and heterogeneity concerns are taken into account in the robustness check models. Research such as Manasseh et al. (2017), Manasseh et al. (2023), Odhiambo (2009), and Al-Malkawi et al. (2012), in contrast to Johansen and Juselius (1990) and Gregory and Hansen (1996), adopted ARDL because it is appropriate and can provide asymptotically normal estimates of long-run coefficients (Pesaran and Shin, 1999). Compared to other models, the ARDL model increases the probability of determining the suitable dynamic model structure, supporting the efficacy of long-run parameters in cointegration techniques (Pesaran et al., 2001; Pesaran and Shin, 1999). However, the dynamic ARDL model is as follows.

In equation (2), ${\epsilon }_{i,t}=({\forall }_i+{\pi }_{i,t})$. The fixed effect known as ${\forall }_i$ denotes the time-invariant or unobserved characteristics unique to Nigeria. The ${\pi }_{i,t}$, also known as time-fixed effects, identifies the time-specific effects that affect country’s dataset over a given period. Hence, others remained as defined above, ${\mathit{\text{Interact}}}_{i,t}$ depict the interactive terms (M2/GDP*CO2 & M2/GDP*NSI), where $\delta$ expresses how much the interaction factors influence economic growth. The exchange rate (EXR) and inflation rate (INFL), are the study’s control variables and $t$ is the unit of time. It is thus expected that $\pi >0$. This suggests that more financial deepening boosts economic growth, whereas rising levels of ecological footprint and insecurity are expected to have the opposite effect. For this reason, a conditional ARDL (p, q, q,,,, q) error correction term (ECT) is stated as follows after the re-parameterized ARDL (p, q) of Pesaran et al. (1999) and Pesaran et al. (2001):

3.3 Marginal effect and threshold effect

To gain a thorough knowledge of the influence of a unit change in national security (NSC) and ecological footprints (CO2) on economic growth in Nigeria, while maintaining all other variables constant, we estimated the marginal (ME) impacts using equations (4) and (5). The marginal effect measures how much revenue growth is likely to vary in response to minor changes in national security and ecological footprints. This is critical now in Nigeria to comprehend the severity of insecurity and the consequences of over-reliance on natural resources such as carbon emissions on economic growth.

The coefficients ($\vartheta \&\sigma )$ in the partial derivative equations (4) and (5) are the main focus. If ($\vartheta \&\sigma )$ are negative i.e. ($\vartheta \&\sigma <0)$ and ($\pi \&\theta )$ are positive i.e. ($\pi \&\theta >0)$, it depicts that a unit change in national security and ecological footprint have adverse effects on the economic growth respectively; while the interaction of financial deepening with the national security and ecological footprint improves economic growth in Nigeria. According to the former, as insecurity and ecological footprint (CO2) rise, their negative impacts reduce both financial deepening and economic growth in Nigeria. Following the works Muoneke et al. (2023), Okere et al. (2022), and Ofori and Figari (2023), calculating the threshold (TH) levels of the national security and ecological footprint is crucial for policymaking. This is because the coefficients ($\vartheta \&\sigma )$as well as ($\pi \&\theta )$ have different signs and magnitudes. Thus, we present the threshold-level equations for the interactive variables as follows.

The possibility of estimating equations (6) means that the marginal effects (ME) must be greater than zero, thus, this is shown in equations (7) and (8) as in below.

Where ME stands for the marginal effect of national security and ecological footprint; while ${\mathit{TH}}_{\mathit{CO}2}$, ${\mathit{TH}}_{\mathit{NSC}}$ and ${\mathit{TH}}_{\mathit{\text{PINS}}}$ are their thresholds respectively.

3.4. Robustness check model – FMOLS and DOLS

Even if the ARDL approach is successful and adequate in building a suitable dynamic model structure that supports the efficacy of long-run parameters and estimates variables only when they are integrated of 1(0) or 1(1), its capacity to manage sequence correlation and endogeneity is limited. We conducted a sensitivity analysis with fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) to lessen the impact of this problem on the output. These models are very efficient in estimating long-run coefficients if the coefficients are cointegrated. While DOLS provides a parametric method that can lessen the association between explanatory variables and error terms (Pedroni, 2001), FMOLS offers a non-parametric model that has the benefit of eliminating autocorrelation and heteroskedasticity concerns (Kao & Chiang, 2001). The FMOLS and DOLS are specified as follows:

Z represents the regressor’s vector (W = $X_{i,t}-X_i^{\prime }$), $X_{i,t}$ stands for explanatory factors, and $S_{i,t}$ indicates dependent variables. The DOLS estimator surprisingly outperforms the OLS, ARDL, and FMOLS estimators in limited samples when it comes to unbiased estimation based on Monte Carlo simulations. By considering endogeneity equally in a model, the robust correction for endogeneity in the explanatory variables is obtained.

4.1. Baseline model – ARDL (p, q) long run estimation

This section presents and discusses the ARDL estimated results on the causal relationships among financial deepening, ecological footprints, national security, and economic growth. Several post-estimation tests were conducted, such as the Ramsey RESET, Breusch–Godfrey serial correlation, and heteroskedasticity test. The RESET test confirms that the regression’s functional form is appropriate. The results of the heteroskedasticity and serial correlation tests show that the variables are homoscedastic and uncorrelated, and the normality test shows that the error terms are normally distributed. The ARDL findings are shown in Table 6 below.

The results displayed in the first column demonstrate that, although the ecological footprint—proxied by the amount of carbon dioxide (CO2) emitted per person—has a significant and positive effect on economic growth. Financial deepening—proxied by the money supply to GDP ratio (M2/GDP)—and national security—proxied by the global terrorism index—have a significant negative relationship with economic growth (proxy, real GDP). The significant inverse relationship between financial deepening and growth suggests that Nigeria’s financial deepening has a mitigating effect on economic growth. This outcome confirms a recent analysis that found 38 million adults in Nigeria are financially excluded, which equates to roughly 36% of the adult population in the country. This shows that in order to encourage the mobilization of savings, facilitate investment, and propel economic growth in Nigeria, it may be necessary to guarantee a strong financial infrastructure as well as better access to financing. According to Apergis et al. (2007), increasing access for individuals who lack sufficient financial resources can thereby speed up economic growth. But studies by Yang (2019), Ndako (2017), Anachedo and Osakwe (2023), Manasseh et al. (2024), and Akintola, Oji-Okoro, and Itodo (2020) held contrary few on the impact of financial depth. Moreover, a negative and significant connection has been seen between economic growth and national security and this conclusion lends credence to the research conducted by Edeme and Nkalu (2019), Saleem et al. (2020), Mehmet (2017), and Saba and Ngepah (2021). It appears from the evidence that growing levels of insecurity are impeding Nigeria’s economic progress. This outcome is consistent with the 2021 Global Terrorism Index research, which ranks Nigeria as the sixth most terrorized nation in the world due to an upsurge in violence that has claimed many lives and destroyed numerous economic assets. Therefore, it will be challenging to achieve economic growth if the Nigerian government does not prioritize measures to strengthen national security by addressing the underlying causes of insecurity, enhancing law enforcement, intelligence-sharing, border control, investing in defense capabilities, and promoting social inclusion.

The ecological footprint, a measure of the consequences of the entire process of producing energy for human use, is most notable for its positive and significant long-term association with Nigeria’s economic growth. Our results were in line with Yang et al. (2021) and Udemba (2020); however, the evidence we provided was in contrast to that of Ansari et al. (2021), Obayagbona (2023), and Obayagbona (2023). This result contradicts the a priori assumption, which maintains that ecological footprints and economic growth are inversely related. Consequently, the significant association that exists between ecological footprints and economic growth might point to an increase in manufacturing that is energy-intensive and associated with environmental degradation, climate change, and the depletion of natural resources. Therefore, the Nigerian government needs to tighten environmental laws and support green technology in order to maintain the rising growth in the face of ecological footprints, as demonstrated by our findings. This can be accomplished by implementing laws that promote climate resilience, the use of renewable energy sources, environmental preservation, and the reduction of ecological footprints. These results counter those of recent studies by Saleem et al. (2020), Mubashra and Shafi (2018), Wang et al. (2020), and Zafar et al. (2019) that shown an inverse link between growth and ecological footprints. Furthermore, after controlling for each variable’s impact on growth, we discovered a direct association between inflation (INFL) and exchange rate (EXR). This result goes against preconceived notions.

The findings in the second column are the outcome of additional research into the interaction impact between national security and ecological footprints. The goal is to acquire a better understanding of whether the impact of financial deepening on economic growth varies with changes in national security or environmental footprints in Nigeria. The interaction of financial deepening and national security (M2/GDP*NSC) has a negative and significant long-term influence on economic growth. This suggests that the interaction effect of insecurity reduces the impact of financial deepening on economic growth by -0.168. As a result, insecurity erodes peace and order, reducing economic activity. These findings align with the findings of several other studies, including Rajan (2022) and Romm (1993), To find out if the level of ecological footprints (CO2) affects the link between financial deepening (M2/GDP) and economic growth, we also interact financial deepening and ecological footprints (M2/GDP*CO2). The findings indicate a significant and negative long-term impact on economic growth. This demonstrates how the interaction of CO2 reduces the effect of financial deepening on Nigeria’s economic growth.

The results show that, in the short term, ecological footprints have a significant positive impact on economic growth, but financial depth and national security have a significant negative impact. In order to reach full convergence to its equilibrium level, economic growth will respond to changes in financial depth, national security, and ecological footprints at a pace of about 34.4% during the first year, according to the ECM, which is -0.344 and has the anticipated negative sign. The bound test for cointegration is validated by the ECM, which is statistically significant at the 5% level, indicating that the variables are in long-run equilibrium. The study concludes that there is a long-term association between the variables based on these findings. Lastly, it shows that the model satisfies the stability criteria using the cumulative sum of recursive residuals (CUSUM) and cumulative sum of squares (CUSUMSQ) tests from Brown et al. (1975). The fact that the CUSUM and CUSUMMSQ are within the 5% major critical bounds makes this clear (see Figure 1). This shows that the calculated parameters remain constant from 1995 to 2022. It illustrates that the estimated parameters remain constant from 1995 and 2022. The ARCH test for heteroskedasticity in the model’s error process yields an F-statistic of 0.295$({\chi }^2=0.929)$, which is not statistically significant (see Table 3). This suggests that heteroscedasticity is not an issue for the model. The Breusch-Godfrey serial correlation Lagrange multiplier (LM) test produces an F-statistic of 0.223$({\chi }^2=0.828)$, indicating no statistical significance for higher order serial correlation. This implies that we cannot reject the null hypothesis that there is no serial correlation in the residuals. We conclude that the data exhibit a normal distribution since the normality test produced a p-value of 0.198, which supports the null hypothesis. The model’s goodness-of-fit (R-square) of 82% suggests that it is appropriate.

Figure 1. CUSUM and CUSUMSQ plots.

Source: Authors’ Concept.

Furthermore, Table 8 presents the tests that utilized Pairwise Granger Causality to evaluate the causal link between financial deepening, national security, ecological footprints and economic growth. Table 8 shows the unidirectional/one-way causal link that we found between financial deepening and economic growth. The causal relationship runs from financial deepening to economic growth, suggesting that financial deepening the driving force behind economic growth. This evidence validates the findings of Manasseh et al. (2024). Similarly, we discovered a two-way causal relationship between national security and economic growth, as well as a one-way link between ecological footprints and economic growth. These results suggest that ecological footprints are the primary driver of Nigeria’s economic growth, and that economic growth and national security are mutually reinforcing. Consequently, ecological footprints stimulate economic growth, while economic prosperity and national security are mutually dependent. So, studies conducted by Mehmet (2017), Edeme and Nkalu (2019), Saleem et al. (2020), Saba and Ngepah (2021), Yang et al. (2021), Udemba (2020), Ansari et al. (2021), and Obayagbona (2023) indicated that ecological footprints and national security boost economic growth. Nonetheless, recent study into the causal link between other variables, such as the exchange rate (EXR) and economic growth, demonstrates a bidirectional or two-way relationship, implying that EXR and economic growth may be predicted mutually.

4.2 Robustness check – FMOLS and DOLS results

Given the efficacy of these models in addressing issues with heteroskedasticity, autocorrelation, and endogeneity, which could affect the outcomes derived from the baseline model (ARDL), sensitivity tests are required to verify whether the results have changed, and the results are presented in Table 9 below.

The FMOLS and DOLS results in Table 9, genuinely corroborated our previous findings using the ARDL model that financial deepening (M2/GDP), national security (NSC), and ecological footprints (C02) are important drivers of economic growth in Nigeria. The data demonstrates that there are both short- and long-term relationships between the phenomena in Nigeria. Further analysis revealed that while financial deepening and national security have negative and significant long-run relationships with economic growth, the ecological footprint (CO2), inflation rate, and exchange rate (EXR) in Nigeria have positive and significant long-run relationships with economic growth. This is indicated by the first column of results. Our earlier results were discovered to be in agreement with the interacting outcomes of the second model (Table 9). Ecological footprints improve the impact of financial deepening on Nigerian economic growth, but national security reduces this gain. The findings suggest that the interactive influence of terrorism inhibits growth, but the interactive influence of ecological footprint promotes growth. As a result, it follows that the ecological footprint is essential to halting environmental damage, climate change, and the depletion of natural resources. Robust checking with the FMOLS and DOLS models confirmed the suitability of the ARDL model for the study, indicating that the results may have implications for policy forecasts.

4.3 Marginal and threshold effects analysis

The findings of the estimated ARDL models (1) and (2), which are displayed in Tables 6 and 9, reveal that national security (NSC), as measured by the global terrorism index, is significant and inversely related to Nigeria’s economic growth, while ecological footprint (CO2) and financial deepening encourage economic growth. Hence, it is essential to investigate if their respective marginal effects promote or inhibit economic growth in Nigeria. Equations (4) and (5) from the baseline model findings were used to compute the marginal effects (ME) of national security (NSC) and ecological footprint (CO2), which were then reproduced in equations (11) and (12), following the studies by Muoneke et al. (2023), Okere et al. (2022), and Ofori and Figari (2023).

The study indicates that there is a negative association between the marginal effects of the interaction between M2/GDP and NSC (π = -0.168<0) and the unconditional effects of NSC (ϑ = -0.864<0). Both the 5% and 1% levels of statistical significance are reached by the effects. When every other factor remains constant, declining economic growth is associated to worsening national security conditions, as indicated by negative values (ϑ & π). Nonetheless, economic growth can be negatively impacted by a decline in Nigeria’s national security, and the growth-promoting effects of financial deepening may be compromised. This demonstrates how growing levels of insecurity hurt Nigeria’s ability to prosper economically. Further inquiry indicates that both the unconditional effect (σ = 0.841161) and the interaction’s marginal effect (θ = 0.139>0) of ecological footprint are positive. Both effects show statistical significance. A positive unconditional effect of the ecological footprint on economic growth implies that greater resource use and environmental effect result in higher levels of economic growth, whereas a positive marginal effect implies that economic growth is inextricably linked to resource mining, manufacturing, and usage. Increased economic activity, such as manufacturing, crop production, and expansion of infrastructure, may be indicated by larger ecological footprints. All of these factors influence the impact of financial deepening on economic growth. The stimulating effect of natural resources might thereby amplify the impact of financial deepening on economic growth. Furthermore, when the coefficients of the ecological footprint and national security ($\vartheta$ & $\sigma$) and ($\sigma$ & $\mathrm{\theta }$) have opposing signs, equations (6) and (8) may be applied to estimate the threshold effect of each. So, the threshold is determined when the marginal effects (ME) are greater than zero. Beyond the threshold level, the potential benefits of economic activity and the influence of financial deepening are presumably outweighed by the environmental degradation associated with higher ecological footprints. The calculated threshold level (${\mathit{TH}}_{\mathit{CO}2}=$0.981) indicates a critical limit above which increases in ecological footprint have a significant impact on economic growth.

4.4 Discussion of findings

The primary goal of this study is to examine the relationships between financial deepening, national security, ecological footprint, and economic growth in Nigeria. The findings below were obtained using yearly time series data from 1995 to 2022, as well as autoregressive distributed lag (ARDL) as the baseline model and fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) as robustness check models. First, the results of the baseline model indicate, a significant long-term relationship between financial deepening, national security, ecological footprint, and economic growth. While financial deepening and national security are significant and have a negative relationship with economic growth, the ecological footprint has a direct and significant impact on Nigeria’s economic growth. While Ndako (2017), Anachedo and Osakwe (2023), and Akintola, Oji-Okoro, and Itodo (2020) support our findings, Apergis et al. (2007) argued that improving access to adequate financial resources increases economic growth. Our findings about the relationship between financial deepening and economic growth contradict their claims. Furthermore, this analysis validates previous research that has suggested that national security is inversely and strongly associated to economic growth (Edeme & Nkalu, 2019; Saleem et al., 2020; Mehmet, 2017; Saba & Ngepah, 2021). As with Yang et al. (2021) and Udemba (2020), our findings on the relationship between economic growth and ecological footprint refuted the evidence offered by Ansari et al. (2021) and Obayagbona (2023). Previous research indicate that financial deepening, national security, and ecological footprint are substantial and significant determinants of economic growth.

Second, evidence from the interaction terms using both the baseline and robust models shows that the interactive influence of financial deepening and national security (M2/GDP*NSC) has a significant and negative long-term relationship with economic growth, whereas financial deepening and ecological footprints (M2/GDP*CO2) have a significant and positive long-term relationship with economic growth. This suggests that, while the interactive influence of financial deepening caused by changes in ecological footprints has a significant and long-term positive impact on economic growth, the interactive influence of financial deepening caused by changes in national security conditions has a negative impact on economic growth. These results therefore align with those of a number of previous research, including Rajan (2022), Romm (1993), and Scheve and Slaughter (2017). Third, a one-way causal link was shown by the Pairwise Granger causality test results, indicating that ecological footprint and financial deepening, respectively, are the driving force of economic growth. This indicates that economic growth is boosted by both ecological footprint and financial deepening. The results of Manasseh et al. (2024), who claimed that financial deepening predicts economic growth in emerging nations, were supported by this research. In a similar vein, we found a bidirectional causal link that suggests mutual reinforcement between economic growth and national security. Fourth, we found a negative and significant correlation between the interaction’s marginal effects of national security (π = -0.168<0) and the unconditional effects of national security (ϑ = -0.864<0), after controlling for the marginal and threshold impacts of national security and ecological footprints. As a result, negative values (ϑ = -0.864 & π = -0.168) indicate an association between declining economic growth and deteriorating national security conditions. Subsequent analysis shows that ecological footprint interaction has a positive and significant relationship between its marginal effect (θ = 0.139>0) and unconditional effect (σ = 0.8412>0). As a result, the expansion of Nigeria’s economy is inextricably related to activities with an ecological impact, such as resource extraction, production and consumption.

Additionally, based on the findings explained above, no empirical research reviewed examined the synergy between financial deepening, national security, environmental footprint, and economic growth, particularly in Nigeria. Few studies in Nigeria focused on the link between financial deepening and economic growth; security and economic growth and; ecological footprint and economic growth, respectively. As a result, one of the study’s strong points is the synergy between the occurrences and the degree of gap caused in the national security measurement. Furthermore, prior empirical studies (see Rajan, 2022; Romm, 1993) were unable to adequately capture the character and implications of terrorism across African countries. The global terrorism index, which assesses the impact of Africa’s rising terrorism rate on economic growth, was employed as a proxy for national security in this study to capture the previously explained. Thus, we found that the global terrorism index and Nigeria’s economic growth were significantly and negatively correlated. This implies that terrorist organizations operating in Africa, including Islamic State in the West African Province (ISWAP), Jama’at Nusrat al-Islam wal Muslimeen (JNIM), and Islamic State in the Greater Sahara (ISGS), pose a threat to Nigeria’s economic growth. In addition, previous studies (Edeme & Nkalu, 2019; Saleem et al., 2020, Mehmet, 2017; Saba & Ngepah, 2021) have not taken into account the interaction link that exists between financial deepening and national security. The long-term evidence from the findings suggested that reducing insecurity through enhanced border protection, judicial enforcement, intelligence cooperation, and dispute resolution could support Nigeria’s economic transformation. The evidence also indicated a significant and inverse relationship between the two. Finally, we examine the marginal effects of national security (π = -0.168<0) on Nigeria’s economic growth, which have likewise received little attention in earlier research. The analysis shows that declining national security conditions also account for variations in Nigeria’s economic growth. The ability to incorporate these knowledge gaps into existing empirical literature is not without restrictions. Thus, we suggest carrying out cross-national research on the connections between national security and economic growth in the future. This would improve a comparative analysis of how the global terrorism index and its heterogeneity affect African countries’ economic growth.

These results highlight how important financial deepening is to Nigeria’s economic expansion. Given the inverse relationship between financial deepening and economic growth in Nigeria, reducing credit availability for both individuals and businesses may stifle investment in profitable ventures such as technology innovation, infrastructure development, and entrepreneurship. Also, enhancing financial accessibility, having strong financial intermediaries, and financial systems encourage saving, and economic growth, which in turn leads to resilience, equitable growth, and a decline in poverty. With this knowledge, Nigerian authorities may create and carry out concerted initiatives to strengthen the banking sector, increase customer access to financial services, encourage financial literacy, and foster financial innovation. In addition, comprehending the connection between economic growth and national security is vital in safeguarding Nigeria’s political stability, vital infrastructure, and sovereignty. The discovered inverse link between national security and growth implies economic growth and prosperity may be negatively impacted by worsening security circumstances in Nigeria. Thus, security concerns like insurgency, terrorism, and intercommunal strife endanger societal cohesiveness, investor confidence, and economic progress. The significance of these findings for Nigerian authorities stems from the fact that they highlighted the necessity of giving priority to initiatives aimed at reducing instability by bolstering law enforcement, intelligence cooperation, and conflict resolution institutions, all of which are necessary to promote economic success. Furthermore, the findings about the marginal effect of national security to economic growth in Nigeria may also be utilized by policy analysts to evaluate the effects of policy actions on employment, income, and health outcomes. The evaluation of policy efforts, resource allocation, and program development in Nigeria can all be enhanced by an understanding of marginal impacts.

Lastly, the significant and positive association between ecological footprint and economic growth suggests that environmental degradation is an inevitable cost of economic growth. Thus, a positive ecological footprint typically depicts the unsustainable exploitation of natural resources like timber, minerals, and fossil fuels. As such, long-term risks to economic sustainability can arise from resource depletion, ecosystem deterioration, biodiversity loss, and perturbation of biological processes. The significance of these, emphasizes how urgently we must move toward sustainable development pathways that strike a balance between social justice, environmental preservation, and economic prosperity. This calls for the implementation of resource-efficiency- and ecosystem-health-promoting policies.