Energy Efficiency, Energy Pricing and Household Poverty: Implications for Nigeria’s Energy Transition Strategy

Nigeria faces the dual challenge of widespread poverty and chronic energy constraints, making the design of a sustainable and inclusive energy transition strategy both urgent and complex. While global evidence highlights the role of energy efficiency in reducing household vulnerability and improving welfare, empirical research on its poverty-reducing potential in Nigeria remains limited. This study investigates the impact of energy efficiency, energy prices, and key socio-economic variables on household poverty, drawing on the Energy-Led Growth Hypothesis (ELGH) and Welfare Economics Theory (WET) as its theoretical foundation. Using the Autoregressive Distributed Lag (ARDL) technique, the analysis captures both short- and long-run dynamics. The results show that energy efficiency significantly reduces poverty in both the short and long run, confirming its potential as a cost-effective welfare-enhancing mechanism. Conversely, rising energy prices exert poverty-increasing effects, while education (literacy) is found to be a significant driver of poverty reduction. Urbanization also demonstrates strong short-run poverty-reducing effects, whereas variables such as government expenditure, employment, household consumption, and inflation show weaker or insignificant impacts. The error correction term indicates a stable long-run relationship, with about 31 percent of disequilibrium corrected annually. The study concludes that energy efficiency should be prioritized within Nigeria’s energy transition strategy, but tariff reforms must be carefully sequenced with social protection measures, targeted subsidies, and investments in education and infrastructure. These findings highlight the importance of combining energy policy with welfare-enhancing interventions to ensure that Nigeria’s transition to sustainable energy is inclusive and equitable.

Energy efficiency; Household poverty; Energy transition

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