An Empirical Analysis of Electricity Generation, Electricity Loss, Exchange Rate Fluctuation and Industrial Sector Productivity in Nigeria (1990-2015)

Abstract

This study investigated the relationships among electricity generation, electricity loss, exchange rate fluctuation and industrial sector productivity in Nigeria over the period 1990 and 2015 using Augumented Dickey Fuller test, Phillips-Perron test, Johansen Cointegration test and Ordinary Least Square estimating technique. The study made use of time series data obtained from the Central Bank of Nigeria Statistical Bulletin of various issues, National Bureau of Statistics, International Energy Agency and International Energy Statistics. Empirical findings revealed that electricity generation has a statistically significant positive relationship with industrial sector productivity in Nigeria. The result further showed that a one megawatt increase in electricity generation would bring about 53.73 units rise in industrial productivity. The study also revealed that there exists a statistically significant inverse relationship between electricity loss and industrial productivity. A one megawatt of electricity lost would bring about 26.06 units reduction in industrial productivity. The analysis also revealed that exchange rate fluctuation has a statistically significant positive relationship with industrial productivity. Based on the estimated results, government should give room for private sector participation or involvement in electricity generation and supply chain to accelerate the present megawatts of electricity generated for industrial and domestic uses; current reform efforts in the power sector by the federal government should be vigorously pursued to bring significant improvements in electricity generation and supply in the country for industrial development; and budgetary allocation to the power sector must be substantially increased to tackle the numerous challenges facing it in the areas of electricity generation, electricity transmission and electricity distribution. In addition, mismanagement of funds by government officials in the power sector should be discouraged through appropriate sanction of the corrupt management members; approval should be given to various state governments proposing to have their own independent power projects by the federal government to boost electricity generation in the country for industrial development; existing electricity distribution channels must be effective and expanded in order to reduce to the barest minimum the incidence of electricity loss; and there should be establishment of a stable exchange rate regime capable of attracting both domestic and foreign investors to boost industrial sector productivity.

Keywords: Electricity generation, Electricity loss, Exchange rate fluctuation, Industrial sector productivity, Unit root, Ordinary least square, Cointegration, Nigeria