Power Generation Capacity and Economic Growth in Nigeria: A Causality Approach.

Abstract

This study examined the impact of power generation capacity on economic growth in Nigeria from 1980 - 2015. In the model specified, Real Gross Domestic Product is a function of Power generation capacity in Kilowatt, Gross capital formation and Unemployment. With the aid of econometric techniques employed (co integration test, vector error correction mechanism and granger causality); the following results were found;  a stable long run relationship exist between the dependent and explanatory variables in the model as supported by the presence of two co integrating equations. This means that the result of this finding can be relied upon in taking long run policy decision. In the VECM equation result presented , the t-statistics for PGCKWH is 0.003106 while its P-value is [0.2659]. The t-statistics for GCF is 1.109381 while its P-value is [0.5843]. The VECM result also showed a t – statistics of - 4652.801 with p value of 0.0297, indicating an insignificant relationship with RGDP. This study concludes that there is no causality between power generation capacity and economic growth in Nigeria within the study period. The study therefore, makes the following recommendations;

For the growth of the economy and improvement in power generation capacity, government must ensure transparency in the overall implementation of power sector policy and its attendant reform agenda. There is need to ensure full implementation of power sector budget through oversight function by the legislative arm of government to check the endemic corruption associated with the sector.

Keywords: Power generation capacity, Economic growth, Causality, Nigeria