Electricity Supply and Output in Nigerian Manufacturing Sector

Abstract

This research examined electricity supply and the output of the Nigerian manufacturing sector. The major objective is to critically determine the impact of electricity supply on the manufacturing output in Nigeria. Numerous literatures only revealed the relationship between economic growth and electricity supply, with little empirical attention on the effect of electricity on the various sectors of the economy. This could lead to fallacy of decomposition because economic growth is a function of the performance of different sectors which certainly differ in their need for electricity. In response to this perceived gap, this study explores the relationship between electricity supply and manufacturing sector’s output in Nigeria. Time series data spanning the period between 1981 and 2013 were analyzed using Johansen Cointegration and Vector Autoregression tests. The results revealed that there exists a long run relationship between electricity and manufacturing output in Nigeria. It also identified that electricity supply has an insignificant relationship with the manufacturing sector in Nigeria. For the Nigerian manufacturing sector to serve as a catalyst for the transformation of the Nigerian economy, we recommend that adequate and stable electricity supply must be a policy focus if the desired output of the manufacturing sector is to be achieved.

Key Words: Electricity Supply, Output, Manufacturing, Cointegration, Vector Autoregression