Electricity Supply and Manufacturing Output in Nigeria: Autoregressive Distributed Lag (ARDL) Bound Testing Approach

Abstract

Electricity has been identified as primary and independent factor of production in modern production process. Hence, this study explore the relationship between electricity supply and manufacturing sector’s output in Nigeria using time series data from 1971 to 2010. It adopts Autoregressive Distributed Lag (ARDL) bounds testing approach to cointegration. Our findings reveal long run relationship between the variables, and shows significant and negative error correction term. Manufacturing output is found to be positively dependent on electricity in both short run and long run, but only significant in the long run.The policy implication of these findings is that electricity supply must be increased if the productive capacity of the manufacturing sector is to be improved. More importantly, this is a prove that if the country is to achieve its economic vision of being among the 20 World industrialized economies in the year 2020, adequate and stable increase in electricity supply, particularly to the manufacturing sector, must remain an uncompromising policy.

Keywords: Electricity Supply, Manufacturing Sector, Factors of Production, Output