An Empirical Analysis of the Energy-Growth Hypothesis for Nigeria (1991 – 2019)

Abstract

Energy consumption is an important indicator of economic modernization and in general the more developed a nation, the more their level of consumption.  Improved productivity can unlock development and this is enhanced by availability and accessibility of electricity supply to the manufacturing and industrial sector.  Hence this study analyzes the impact of electricity consumed by only the manufacturing and industrial sector; excluding the consumption for domestic use so as to test the energy-growth hypothesis for Nigeria over the period 1981 to 2019.  The study also included the impact of electricity consumption on manufacturing output.  The analysis was done using OLS techniques and ECM.  The results revealed a positive significant relationship between manufacturing output and electricity consumption as well as an inverse relationship between electricity consumption and economic growth in the long run.  Granger causality was also done and a unidirectional causality was found from economic growth to electricity consumption; showing support for the conservation hypothesis of the Energy-growth hypothesis.  Unidirectional causality was also found from manufacturing to electricity consumption as well.  The study recommends the need to develop huge infrastructure for adequate supply of electricity because as the economy grows the need for electricity consumption will increase.

DOI: 10.7176/JETP/11-5-03

Publication date:October 31^st 2021