Advancing agro-environmental sustainability in Africa: The critical role of infrastructure development and banking sector stability

Agro-environmental sustainability schemes are set up to harmonize agricultural productivity with environmental conservation, ensuring long-term food security while safeguarding ecosystems. This involves implementing practices that conserve resources, minimize pollution, and maintain biodiversity. By aligning with sustainable development goals, this approach promotes resilient, equitable, and environmentally sustainable agricultural systems. This study investigates the role of financial stability in moderating the impact of infrastructure development on agro-environmental sustainability across 46 African countries from 2003 to 2020. Agroenvironmental sustainability is measured using the agricultural nitrous-oxide and methane gas emissions in the African Agri-industry. Empirical analyses employing Driscoll-Kraay standard errors, instrumental variables two-stage least squares (IV-2SLS), and system GMM to address potential endogeneity. The findings demonstrate a U-shaped relationship between infrastructure development and agro-environmental sustainability. These findings hold consistently across different income groups, levels of infrastructure development, and infrastructure development indicator (that is transport, electricity, ICT, and potable water). Our analysis also supports the validity of the Environmental Kuznets Curve (EKC) hypothesis. Interestingly, financial stability not only enhances agro-environmental sustainability directly but also amplifies the positive impact of infrastructure development, supporting more sustainable outcomes. Prioritizing the development of frameworks that stabilize the banking sector will help policymakers finance sustainable agricultural projects. This includes investments in energy-efficient irrigation systems, renewable energy installations, and environmentally friendly transportation networks.