ENERGY CONSUMPTION AND PRODUCTIVITY IN NIGERIA

Abstract

Energy is critical to the survival and expansion of any economy, but in Nigeria, energy consumption has been skewed towards household use, and below thresholds for sector driven growth. The paper updates in time and methodology those studies highlighting the significance of energy use for economic growth, using the Bound test and the Auto regression Distributed Lag (ARDL) to establish the long and short run relationships between disaggregated energy consumption and economic growth in Nigeria from 1990 to 2016. The variables considered were real GDP, energy consumption decomposed into electricity and petroleum consumption, labor and capital. The findings showed that, in the short and long run, petroleum consumption and labour have a significant positive relationship with GDP. Furthermore, the causality results showed that feedback causation between economic growth and energy consumption as well as labour exists, while one-way causation runs from labour to economic growth. The expansion and diversification of the power-generation portfolio in the country would improve energy consumption towards better output. Also, policies to encourage industrialization would move energy demand towards increasingly productive uses.