Sensitivity Between Economic Growth and Gas Consumption in Nigeria

Abstract

This paper build on the existing research (Adamu, A. and Darma M. (2016)) to further analyse the dynamic relationship between gas consumption and economic growth in the Nigeria. This helps to discover if sudden increase in the gas consumption can positively affect economic growth immediately. After administering VAR model, impulse response function and variance decomposition economic techniques were used to analyse the sensitivity between economic growth and gas consumption in the country. The research found that change in economic growth in the country cannot be explained by gas consumption in the period of shock, but change in gas consumption in the period of shock can be explained largely by changes in its own self and then by changes in economic growth. However, the change in gas consumption responded negatively to shock in the change in economic growth and vice versa in the period of the shock, but in subsequent period, change in gas consumption responded positively to change in economic growth. We concluded that among other variables, change in gas consumption has more influence to the movements of the economic growth, which further discovered the unique relationship between the gas consumption and real economic growth in the country in the event of shocks. Gas consumption is highly and positively responsive to its own innovation, which means direct investment in the sector can result to significant improvement in the gas consumption. The development of domestic gas consumption cannot significantly come as a result of shocks or intervention in the other sectors, it has to be a deliberate actions and interventions to enhance the gas development.

Keywords: Gas Consumption, Economic Growth, Nigeria, Shock, Sensitivity