Assessing the Effect of Green Loans and Carbon Finance on Sustainable Cities and Community Development in Nigeria: An Analysis of Urban Sustainability Indices

Nigeria’s rapid urbanisation offers both opportunities and challenges for sustainable development, necessitating innovative financial mechanisms to support climate-resilient infrastructure. This study evaluates the impact of green loans and carbon finance on sustainable cities and community development in Nigeria. Using an ex-post facto research design, the study analyses quarterly data from 2012 to 2024 sourced from the Central Bank of Nigeria, NBS, World Bank, and UNEP. The Autoregressive Distributed Lag (ARDL) model examines the short-term and long-term impacts of green finance on urban sustainability indicators, including energy efficiency, waste management, air quality, and green infrastructure. Findings indicate that green loans and carbon finance have a statistically significant positive impact, although they are hindered by policy fragmentation and institutional inefficiencies. The study fills a critical research gap and recommends adopting stricter green loan standards, improved carbon pricing, and targeted capacity-building for planners and financial institutions to enhance the role of green finance in Nigeria’s sustainable urban development.