Inland Natural Gas Consumption and Real Economic Growth in Nigeria: ARDL Cointegration Test

Ahmed Adamu, Muttaqah Rabe Darma


Nigeria was ranked second worst country in terms of gas flaring, its domestic energy demands keep increasing in the wake of inadequate alternative cleaner (compare to oil) energy sources like natural gas. This is why Nigerian gas master plan was proposed to develop the natural gas for domestic utilization. Consequently, this research assessed the relationship between domestic gas consumption and real economic growth in the country to discover the resulting economic effect of the proposed gas development plans.  To analyse the effect of gas development on the country’s economy, an ARDL bound cointegration test was used, where oil production, gas consumption and real GDP were used in the model, cointegration was found, and positive and significant long run relationship was found between gas consumption and real economic growth, where a persistent 1% increase in domestic gas consumption in the long run causes 2.89% increase in real economic growth in the country. It was also found that the country is likely to be facing the economic problem of resource curse due to the potential adverse effect of crude oil production on real GDP, even though this is not statistically significantly justified. Therefore, if gas flaring is stopped, and more investment as well as further infrastructures are provided in the gas sector in the country, the gas sector can then start to feed in more to the economic productivity, and thereby making the economy dependent on the gas sector eventually due to continues increase in gas consumption, and then the significant link between gas consumption and economic growth can be actualised. In addition, direct investment in gas development can lead to high positive impact on the gas consumption as discovered in this research. Natural gas should be supplied to residential and commercial sectors to stimulate more domestic gas demand through gas pipelines, CCGT and GTL. The country’s economy should be diversified to tackle the likely problem of resource curse. The findings of this research further justified the Nigeria gas master plan’s objective and serves as an academic guide toward actualizing and extending the objective of the plan in the country.

Key words: Gas consumption, ARDL, real economic growth, natural gas, oil production, GDP

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