Econometric Analysis of Electricity Consumption, Capacity Utilization and Economic Growth in Nigeria: A Disaggregated Analysis

Abstract

The study examined the econometric analysis of electricity consumption, capacity utilization and economic growth in Nigeria: A Disaggregated Analysis. The objectives of the study were to determine the causality between economic growth and electricity consumption sources and to determine capacity utilization of the manufacturing industries and electricity consumption sources. Secondary data sourced from the Central Bank of Nigeria (CBN) was used for the study. The study adopted regression analysis and causality tests for the study to achieve the stated objectives. However, the Augmented Dickey Fuller (ADF) test was conducted to determine the properties of variables used in the study and also to test the stationarity. The independent variables were hydroelectricity, coal, natural gas and oil sources of electricity while the dependent variable was economic growth (proxied by real GDP) and capacity utilization was used as a function of electricity sources. The result of granger causality tests showed the existence of uni-directional relationship between oil and RGDP. No causality was found between RGDP and other variables. The regression analysis results showed that coal, hydroelectric and natural gas sources were the factors contributing to economic growth.

For capacity utilization, the results found a bi-directional relationship between capacity utilization and hydroelectric sources, oil sources; uni-directional relationship existed between capacity utilization and natural gas. No causality was observed between coal and capacity utilization.  The economic implication of this finding is that energy enhancement policy could enhance economic growth in Nigeria. The study concluded that hydroelectricity and natural gas were factors that contributed mainly to electricity consumption in Nigeria.

Keywords: Electricity consumption, Capacity utilization, Regression analysis, Causality test and Augmented Dickey Fuller test.