Electricity Supply Dynamics and Economic Growth in Nigeria: Evidence from an Error Correction Model (1980-2021).

This research study investigates the impact of electricity supply dynamics and economic growth in Nigeria: evidence from an Error Correction Model (1980 – 2021). The study examined the effects of electricity demand-supply gaps, electricity pricing per capita, lending interest rates, and disposable income on GDP. Result of ADF unit root test confirm that all variables were integrated of order one (I(1)); and this necessitated the test for long-run relationship. Thus, the cointegration result shows that there is one cointegrating equation ie trace statistics (83.73255) is greater than their respective critical value (69.81889) at 5% level of significance, hence there is a long-run equilibrium relationship among the variables. The ECM results reveal that power outages significantly reduce economic growth as a million MWh of deficit in electricity demand reduces GDP by 7600.8billion Naira, while disposable income positively and significantly drives growth. Interestingly, lending interest rates show a positive relationship with GDP, contrary to conventional expectations, possibly reflecting credit expansion during periods of economic optimism. Electricity pricing exhibited a negative but statistically insignificant effect. The findings highlight the importance of reliable power infrastructure, income-enhancing fiscal policies, and balanced energy pricing strategies for fostering inclusive economic growth in Nigeria. Therefore, the study recommends for governments’ increasing investments in Energy/Electricity infrastructure in order to enhance energy supply and hence reduce power outages, benefiting all sectors of the economy. Also, there is need to advocate for full privatization of the Nigeria’s energy sectors including electricity generation and the downstream.

Electricity supply, Economic growth, Power outages, Energy pricing, Error Correction Model, Nigeria. JEL Classification: B41, C22, C32, O47, F43, P22, Q43, Q47.

1. Aghion, P., & Howitt, P. (1998). Endogenous Growth Theory. MIT Press. [Google Scholar] [Crossref]

2. Akinlo, A. E. (2009). Electricity consumption and economic growth in Nigeria: Evidence from cointegration and co-feature analysis. Journal of Policy Modeling, 31(5), 681–693. https://doi.org/10.1016/j.jpolmod.2009.03.004 [Google Scholar] [Crossref]

3. Akuru, U. B & Okoro, O. I. (2011). A prediction on Nigeria’s oil depletion based on hubbert’s Model and the Need for Renewable Energy. ISRN Renewable Energy, 11. [Google Scholar] [Crossref]

4. Ali, H. S., Nathaniel, S. P., Uzuner, G., Bekun, F. V., & Sarkodie, S. A. (2020). Trivariate modelling of the nexus between electricity consumption, urbanization and economic growth in Nigeria: fresh insights from Maki Cointegration and causality tests. Heliyon, 6(2), e03400. doi:10.1016/j.heliyon.2020.e03400 [Google Scholar] [Crossref]

5. OECD Countries. International Journal of Energy Economics and Policy 3(3), 247-261 www.econjournals.com [Google Scholar] [Crossref]

6. Awodumi, O. B., & Adewuyi, A. O. (2020). The role of non-renewable energy consumption in economic growth and carbon emission: Evidence from oil producing economies in Africa. Energy Strategy Reviews, 27, 100434. doi: 10.1016/j.esr. 2019.100434 [Google Scholar] [Crossref]

7. Barro, R. J. (1991). Economic Growth in a Cross Section of Countries. The Quarterly Journal of Economics, 106(2), 407–443. https://doi.org/10.2307/2937943 [Google Scholar] [Crossref]

8. Calderón, C., & Servén, L. (2010). Infrastructure and Economic Development in Sub-Saharan Africa. Journal of African Economies, 19(suppl_1), i13–i87. https://doi.org/10.1093/jae/ejp022 [Google Scholar] [Crossref]

9. Central Bank of Nigeria (2000). The changing structure of the Nigerian economy and implications for development. Lagos: Realms Communications Ltd. [Google Scholar] [Crossref]

10. ____________ (2021) Statistical Bulletin .CBN Abuja : Research and development unit. [Google Scholar] [Crossref]

11. Dai, L.; Jia, R.; & Wang, W. (2022). Relationship between economic growth and energy consumption from the perspective of sustainable development. Journal of Environmental and Public Health. 1-10 https://doi.org /10.1155/2022/6884273 [Google Scholar] [Crossref]

12. Engle, R. and Granger, C. (1987), Cointegration and Error Correction: Representation , Estimation and Testing. Econometrica.55.251-276. http://dx.doi.org/10.2307/1913236 . [Google Scholar] [Crossref]

13. Erbaykal, E. (2008). Disaggregate energy consumption and economic growth: Evidence from Turkey. International research Journal of Finance and Economics 20, 172-179. [Google Scholar] [Crossref]

14. Galadima, M.D & Aminu, A.W. (2020) Nonlinear Unit root and nonlinear causality in natural gas-economic growth nexus: Evidence from Nigeria. Energy, 116415.doi: 10.1016/j.energy.2019.116415. [Google Scholar] [Crossref]

15. Gujarati, (2003). Basic Econometrics. 3rd Edition. New York: McGraw-Hill, Inc. [Google Scholar] [Crossref]

16. Imandojemu, K., & Tonuchi, J. E. (2021). Contribution to the empirics of electricity blackouts and productivity in Nigeria. Energy Economics Letters, 8(1), 60–69. [Google Scholar] [Crossref]

17. Inuwa, N., Adamu, S., & Sani, M. B. (2022). Natural resource and economic growth nexus in Nigeria: a disaggregated approach. Lett Spat Resour Sci 1(5), 17–37. https://doi.org/10.1007/s12076-021-00291-4 [Google Scholar] [Crossref]

18. Joseph, T. E. (2019). Investigating renewable energy potentials in solving energy crisis in Niger Delta riverine communities, Nigeria. International Journal of Research in Electronics and ComputerEngineering(IJRECE).https://www.academia.edu/download/61043706/IJRECE_G524.pdf [Google Scholar] [Crossref]

19. Lawal, A. I., Ozturk, I., Olanipekun, I. O., & Asaleye, A. J. (2020). Examining the linkages between electricity consumption and economic growth in African economies. Energy, 118363. [Google Scholar] [Crossref]

20. Lucas, R. E. (1988). On the Mechanics of Economic Development. Journal of Monetary Economics, 22(1), 3–42. https://doi.org/10.1016/0304-3932(88)90168-7 [Google Scholar] [Crossref]

21. Nathaniel, S. P., & Bekun, F. V. (2020). Electricity consumption, urbanization, and economic growth in Nigeria: New insights from combined cointegration amidst structural breaks. Journal of Public Affairs, e2102. doi:10.1002/pa.2102 [Google Scholar] [Crossref]

22. OECD/IEA.2022(http://www.iea.org/stats/index.asp),subjecttohttps://www.iea.org/t&c/termsandconditions/ [Google Scholar] [Crossref]

23. Romer, P. M. (1990). Endogenous Technological Change. Journal of Political Economy, Chicago: University of Chicago Press. 98(5, Part 2), S71–S102. https://doi.org/10.1086/261725 [Google Scholar] [Crossref]

24. Sarwat, R., Faiz. B., & Saadia S. (2011). Dynamic relationship between energy and economic growth: Evidence from D8 Countries. The Pakistan Development Review 50(4), 437–458 [Google Scholar] [Crossref]

25. Tonuchi, J. E., & Ariolu, C. (2022). Renewable energy deployment and economic transformation in Sub-Saharan Africa: Opportunities and constraints. African Economic and Management Review, 2(1), 22–36. [Google Scholar] [Crossref]

26. UNIDO (2016). Economic Report on Africa: Greening Africa’s Industrialization. United Nations Industrial Development Organization. https://www.unido.org/resources/publications [Google Scholar] [Crossref]

27. Wang, Z., Asghar, M. M., Zaidi, S. A. H., Nawaz, K., Wang, B., Zhao, W., & Xu, F. (2020). The dynamic relationship between economic growth and life expectancy: Contradictory role of energy consumption and financial development in Pakistan. Structural Change and Economic Dynamics, 53, 257–266. [Google Scholar] [Crossref]

28. Yang, X. & Khan, I. (2022), Dynamics among economic growth, urbanization and environmental sustainability in IEA Countries: The role of industry value-added. Environmental Science and Pollution Research, 29 (4), 4116-4127. https://doi.org/10.1007/s11356-021-16000-z [Google Scholar] [Crossref]

• Enhancing Formation Control of Multi Agent Systems Using Ann Based Technique
• Improving Sliding Mode Control with Chattering Reduction using Fuzzy Based Technique
• Cooking Quality, Fasting Blood Glucose, Glycemic Index and Load of High–Fiber Noodles Made from Wheat, Tiger Nut Residue and Cassava Flour Blends
• Matrix Rhythm Therapy Versus Interferential Therapy Combined with Lumbar Stabilization Exercises in Chronic Non-Specific Low Back Pain: A Randomized Comparative Trial
• Formulation and Sensory Evaluation of Functional Cake Prepared from Sweet Potato Powder