THE IMPACT OF CLIMATE VARIABLES ON KEY FINANCIAL MARKET INDICATORS IN NIGERIA: AN ARDL APPROACH

Abstract

This study investigates the macro-financial effects of climate change on investment performance in Nigeria, focusing on the interaction between key climate variables, rainfall, temperature, and carbon emissions, and financial indicators such as Treasury Bill Rate (TBR), Stock Market Index (SMI), and Bond Yield (BOY). Using the Autoregressive Distributed Lag (ARDL) model on a 34-year time series, the study examines both short- and long-run relationships between climate and financial variables. The results reveal that rainfall exerts a statistically significant negative effect on TBR in both the short and long run, suggesting that extreme rainfall events influence short-term liquidity and monetary dynamics. However, temperature, carbon emissions, and inflation exhibit no significant impact on SMI or BOY, indicating limited climate sensitivity in long-term capital markets. The findings underscore the partial responsiveness of Nigeria’s financial system to climate variability and point to weak environmental signal integration. The study concludes that Nigerian financial markets remain in the early stages of climate-risk pricing and recommends that regulatory institutions such as the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC) deepen climate-finance research, strengthen data infrastructure, and integrate climate disclosures into financial reporting to improve market resilience