Finance, Governance, and Renewable Energy Transitions in Sub-Saharan Africa: Testing the Energy Kuznets Curve

Udo, Emmanuel Samuel; Okoh, Johnson Ifeanyi; Agbadua, Oyakhiromhe Bamidele; Akpan, Ededem Jack; Okuji, Obinna Oreh; Ajudua, Emmanuel Ifeanyi

doi:10.2478/foli-2025-0034

Abstract

Purpose

This study explores how the interplay between financial sector development (FSD) and governance quality (GOVE) influences the adoption of modern renewable energy (MREN) in 11 sub-Saharan African (SSA) countries (1999–2023). It also tests the modern renewable energy-environmental Kuznets curve (MRENEKC) hypothesis, assessing the contribution of inclusive growth, urbanization, and trade openness in shaping the regions renewable energy transitions.

Research methodology

Employing a pooled mean group autoregressive distributed lag model, this study captures both short- and long-term dynamics, while accounting for cross-sectional dependence and regional heterogeneity. By focusing on the interactive roles of FSD and GOVE, the study contributes to the literature on sustainable energy development in emerging economies.

Results

The results confirm the validity of the MRENEKC hypothesis, revealing a U-shaped relationship between income and MREN adoption. FSD and GOVE, significantly drive MREN adoption, though effects vary regionally. East/Southern Africa leveraged FSD effectively for geothermal and wind projects (Kenya, Tanzania), whereas West/Central Africa’s lax governance structure diminishes FSD’s influence. These results reveal the need for regionally tailored institutional and policy reforms that integrate financial infrastructure with institutional quality to accelerate renewable energy transitions.

Novelty

This study uniquely applies the Modern Renewable Energy-Environmental Kuznets Curve (MRENEKC) framework within the SSA context to offer a comprehensive analysis that links FSD and GOVE to MREN adoption. It fills a critical gap by assessing this underexplored dynamic, and provides actionable insights for policy targeting green growth, energy access, and institutional reform in SSA.

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