Causality Nexus Between Electricity Consumption and Growth in Nigeria Manufacturing Sector

The study examined the causal relationship between electricity consumption and manufacturing sector’s growth in Nigeria using time series data covering the period 1986 – 2017. Multiple least square regression method was used to capture the effect of electricity consumption and other variables on manufacturing sector’s growth, with the aid of Eview software. Granger causality test was conducted to examine the direction of causality between electricity consumption and manufacturing sector’s growth. The study found that electricity consumption has positive and significant effect on the growth of the manufacturing sector. Also, the study revealed an evidence of unidirectional causality from manufacturing sector’s growth to electricity consumption. It was also infered from the trend analysis that Electricity Consumption in Nigeria has a positive and direct impact on the growth of Nigeria Manufacturing Sector. Since the study shows how electricity is vital to manufacturing sector, any impediment to electricity will grossly affect manufacturing sector’s growth. To enhance sustainable growth in manufacturing sector, appropriate reforms must come up to ensure stable electricity in Nigeria.


Introduction
The Electricity Consumption has attracted much interest in recent times because it is seen as not only related to economic wealth but also an indicator of socioeconomic development. The demand for electricity is increasing rapidly, particularly in the developing countries.
Electricity Consumption is vital to Nigeria's wellbeing because it is used for domestic, commercial and industrial purposes in the country. Poor access to electricity in Nigeria has been a major impediment to Nigeria's economic growth.
Manufacturing sector, according to Okonjo and Osafor (2007) have been adjudged as the engine of economic growth but its performance is grossly dismal due to inadequate electricity. Manufacturing sector is the aspect of an economy that engages in the production of real goods by transforming raw materials through production process. Manufacturing is therefore the life force for sustainable economic growth: is a catalyst to the transformation of an economy from a raw material base into a more active and productive economy. For an economy to achieve sustainable growth, it is imperative to have a sound manufacturing sector. A vibrant and well-efficient manufacturing sector is a necessary impetus for rapid and favourable economic growth.
Regular and sufficient electricity is one of the most crucial determinants stimulating economic growth for any economy. Electricity is the most flexible form of energy and constitutes one of the critical resources for modern life and economic growth of any nation (Enebeli, 2010). Hence, due to few studies on electricity consumption and growth, facts on energy are also adapted for this study. Economic growth results from growth in three factors: capital input, labour input and productivity. The relationship between use of energy and economic growth has been a subject of greater inquiry as energy is considered to be one of the important driving forces of economic growth in all economies (Pokharel, 2006). These incidents showed that economic growth is closely related with the use of energy and caused economy to be defined within the context of energy (Jobert and Karanfil, 2007). Costantini and Martini (2009) argue that most of the literature on energy and economic development discusses how growth affects energy use rather than vice versa. This aspect of literature considers economic growth as the main driver for energy demand (electricity consumption) and only advanced economies with a high degree of innovation capacity can decrease the consumption without reducing economic growth.

Problem Statement / Justification
Previous theoretical and empirical studies were either centred on "energy consumption and economic growth in Nigeria" or "electricity consumption and economic growth in Nigeria". This study moved further by examining the causality nexus between electricity consumption and growth of the manufacturing sector in Nigeria.
Poor electricity distibution is perhaps the greatest infrastructural problem confronting the manufacturing Research on Humanities and Social Sciences www.iiste.org ISSN 2224-5766 (Paper) ISSN 2225-0484 (Online) Vol.10, No.6, 2020 38 sector. The Manufacturing and other sectors of the economy experiences power failure or voltage fluctuations about seven times per week, each lasting for about two hours, without the benefit of notice to electricity consumer (Adenikinju, 2003). This is a major factor that affects the smooth operation of the manufacturing sector. Hence, the need to examine the causal link between electricity consumption and growth of manufacturing sector in Nigeria. This is different from the studies on electricity consumption and economic growth.
1.2 Objectives of the study. The study examined the effect of electricity consumption and some other variables on economic growth. It also examined the causality nexus between electricity consumption and growth of manufacturing sector in Nigeria. The linkage of electricity consumption and manufacturing growth were also examined by thier trends flow.

Literature Review
The link connecting electricity consumption with GDP has been an issue of intense debate in the literature. Scholars are still unable to arrive at an agreement on the kind as well as nature of the causal relationship that connect electricity consumption with GDP. This was owing to the fact that the causal direction among economic variables and electricity consumption, in addition to the techniques utilized to build up this connection remain debatable. Due to few studies on electricity consumption and growth, facts on energy are also adapted for this study. (2013), the environmental impact of energy used is influenced not only by energy intensity of output (the structural component) but also by the carbon intensity of energy (the technology component) the implication of this is that the environmental benefits of reduction in energy intensity may not be achieved if the carbon intensity of energy use is on the increase. Furthermore, if the energy rebound theory is correct, then reduction in energy intensity is not desirable for environmental sustainability. According to this theory, the more efficiently energy is used, the greater the use of energy. The implication of this is that electricity efficiency gains may cause electricity consumption to rise above the pre-efficiency levels. Soytas and Sari (2003) discovered there is no considerable causal connection between GDP and electricity consumption. Lee (2006) discovered bidirectional causality among GDP and energy consumption by utilizing a multivariate framework. Ozturk and Acaravci (2011) believe that electricity consumption and GDP have non directional causality. Harris and Prakash (2012) investigated the economic growth and electricity nexus using co-integration with the result showing a short-term unidirectional causality from electricity consumption to economic growth. Olusanya (2012), found that electricity showed a positive relationship to economic growth in Nigeria.

Empirical Review
In the study of Masuduzzaman, (2012), three variables (electricity consumption, GDP and investment) were modeled for Bangladesh and the results confirmed the existence of a unidirectional causality running from electricity consumption to economic growth. Yilmaz and Hasan (2014) investigated this relationship for 21 emerging economies and found a positive relationship with bi-directional causality. The empirical work of Akinlo (2009) also discovered a bi-directional relationship between electricity consumption and economic growth.
It is very important for prospective manufacturer and policy maker to know the direction of causality between electricity consumption and growth in the manufacturing sector to stimulate smooth operation, profitability and growth.
Previous studies on the causality nexus brought contradictory results and they were not centred on manufacturing growth. There is need to further research on causality nexus between electricity and growth as related to manufacturing sector in Nigeria.

Data and methods of Research
The secondary data of labour, capital and electricity consumption used in this study were extracted from the World Development Indicator (WDI, 2017). The GDP from manufacturing sector (MFGDP) was used as a proxy for growth in the sector which is a common choice in literature and its data were derived from Central Bank Of Nigeria Statistical Bulletin (2017). Corruption parameter index was sourced from Transparency International record.

Modelling
The study used a Cobb-Douglas production function as adapted in the study of Hamad, Hayat and Luqman (2012) . Also, in the study of Ogundipe and Apata (2013). Their works centered on the effect of electricity consumption on economic growth. The function can be further adapted to growth in manufacturing sector: Research on Humanities and Social Sciences www.iiste.org ISSN 2224-5766 (Paper) ISSN 2225-0484 (Online) Vol.10, No.6, 2020 The general form of the production function is Y= AK α L β …………………………………………………………..(1) MFGDP = β0ELECT β1 KAP β2 LAB β3 CPI β4 ……………………….. (2) The expression above can be written explicitly as: MFGDPt = β0 + β1ELECTt + β2KAPt + β3LABt + β4CPIt +Ut ……… (3) The explicit form of the model in (3)  Error term It is pertinent to note that " the higher the CPI the lower the Corruption level of any country". Hence, the approximate expectation is β1 -β4 > 0 The model for granger causality test can be expressed as: The above equation 4 and 5 is adapted for the main objective of this study which centered on the causality relationship between electricity consumption and growth in Nigerian manufacturing sector. According to Gujarrati (2003) while explaining concept of Granger Causality "If event A happens before event B, then it is possible that A is causing B. However, it is not possible that B is Causing A. Then, one can say event A granger causes event B"  Research on Humanities and Social Sciences www.iiste.org ISSN 2224-5766 (Paper) ISSN 2225-0484 (Online) Vol.10, No.6, 2020 40 in the manufacturing sector. It means corruption in the manufacturing sector is so minimal and controlled not to have brought negative effect to growth.

Analysis of result
In terms of overall significance, the independent variables electricity consumption, capital, labour, and corruption level had a combined significant effect on growth of the manufacturing sector. The Durbin-Watson value of 1.89 which is very close to 2 is an indication of the absence of auto-correlation.

Granger Causality Test:
The Causality test using the pairwise approach shows the Causal nexus between electricity consumption and GDP of manufacturing Sector. Table 3 shows the result of Pairwise Granger Causality test that was conducted. The Prob-value of 0.046 <0.05 level of significance implies we cannot reject the Null hypothesis, that says electricity consumption (LELECT) does not Granger cause growth in manufacturing sector (LMFGD) during the observed period. This could be a result of the irregular electricity supply to the manufacturing sector. This can be also ascribed to major reason why some big manufacturing companies in Nigeria relocated their factories to those countries where they would have better access to electricity.
The other Prob-value of 0.5925 implies growth in manufacturing sector (LMFGDP) Granger causes electricity consumptions. This means the bigger the manufacturing sector causes increase in electricity consumption.

Conclusion and Recommendations:
This study examined the effect of Electricity consumptions, Labor, Capital and Corruption free society on the growth of the manufacturing sector. The regression result confirms that all the independent variables have positive and significant effect on growth of the manufacturing sector. The study also examined the causality nexus between electricity consumption and growth in the manufacturing sector. The result of the granger causality test revealed that manufacturing sector growth Granger causes electricity consumption. However, electricity consumption does not granger cause manufacturing growth in Nigeria for the observed period which could be ascribed to incessant power failure in the country. There exist a unidirectional causality from manufacturing sector growth to electricity consumption. It was also infered from the trend analysis conducted that the Electricity Consumption in Nigeria has a positive and direct impact on the growth of Nigeria Manufacturing Sector for the observed period of study .
To enhance sustainable growth in the Nigeria manufacturing sector, appropriate reforms must be put in place to meet the growing electricity consumption in Nigeria. Electricity consumption is a catalyst to growth in the manufacturing sector. Growth in the manufacturing sector will also propel economic growth and development in Nigeria.