RELATIONSHIP BETWEEN ELECTRICITY CONSUMPTION AND THE ECONOMIC GROWTH IN NIGERIA

RELATIONSHIP BETWEEN ELECTRICITY CONSUMPTION AND THE ECONOMIC GROWTH IN NIGERIA

ABSTRACT

This study empirically examined the relationship between energy consumption and economic growth in Nigeria. Time series data was generated covering the period 1970 through 2009. The study used electricity consumption and real gross domestic product to test for this relationship. By applying unit roots, the co-integration techniques, and static regression analysis, the results derived infer that there exists a positive relationship between current period electricity consumption and economic growth and so, the null hypothesis predicted is not supported by this study. The implication of the study is that increased electricity consumption is a strong determinant of economic growth having an implicit effect in lagged periods and both an implicit and explicit effect on the present period in Nigeria. Thus, it is pertinent that this sector should be given more relevance by fully implementing the process of electricity liberalization and privatization, exploiting the opportunities laden in the sector to increase economic growth. It further recommends that emphasis on non-market policies like public enlightenment, enforcing energy efficiency standards will encourage electricity conservation and efficiency especially in the residential sector which is the largest consumer of electricity in Nigeria. Lastly, providing steady electricity supply is paramount for the country’s drive towards industrialization.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

The growth, prosperity and national security of any country are critically dependent upon the adequacy of its electricity supply industry. Indeed, the link between electricity supply and economic growth is such that electric energy generation is not only a major and increasing source of energy; it is also for us a growth industry as well as ‘entirely new industry ’ (Okongwu,1986). Energy is a required input for production and consumption activities, making it indispensable source of economic growth. Nigeria is no exception. It is instructive to note that, electric power is vital for economic growth and quality of life not only because it fosters the productivity of capital, labour and other factors of production, but also that increased consumption of energy, particularly commercial energy like electricity signifies high economic status of a country (Adebola, 2011), These facts have attracted researchers to investigate the role of electricity in different countries.

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RELATIONSHIP BETWEEN ELECTRICITY CONSUMPTION AND THE ECONOMIC GROWTH IN NIGERIA