Causality between Manufacturing Efficiency, Energy Use and Economic Growth in Nigeria

International Journal of Research and Innovation in Social Science (IJRISS) | Volume IV, Issue VIII, August 2020 | ISSN 2454–6186

Causality between Manufacturing Efficiency, Energy Use and Economic Growth in Nigeria

Olabode Eric Olabisi (Ph.D)

Department of Economics, Faculty of Humanities, Social & Management Sciences, Elizade University, Ilara-Mokin, Ondo State, Nigeria

Abstract: Studies on whether manufacturing productivity with interaction of energy use promotes economic growth are of cardinal importance as a result of the fact that energy use measured in kilogramme of oil equivalent per capita is a major factor that engineers the growth of manufacturing productivity. Using the unrestricted Vector Auto-regression (VAR) approach, the study examines the causality between manufacturing productivity, energy use and economic growth in Nigeria from 1985 to 2018. The Augmented Dickey Fuller unit-root tests, Pairwise and Wald test statistics Granger causality tests were employed. Results reveal two-way causality between manufacturing productivity and economic growth in Nigeria. While economic growth and manufacturing productivity (MP) Granger cause energy use (EU) and not vice versa, jointly examined, MP and EU promote growth in Nigeria, GDP and EU promote MP, and GDP combined with MP enhances the use of energy in Nigeria. It is therefore recommended that adequate energy supply should be made available to the manufacturing sector for meaningful economic growth to occur in Nigeria.

Keywords: Augmented Dickey Fuller, Nigeria, Pairwise and manufacturing growth

JEL Codes: F4 & O4

I. INTRODUCTION

The question of whether manufacturing productivity promotes economic growth is addressed in this study. This is germane because the growth of any economy has a direct or indirect effect in promoting the economic growth of other neighbouring countries. Among other direct effects, growth in the economy of one country enhances trading confidence in the manufactured products of such country. As a result of this, most neighbouring countries rely on manufacturing output for their productive activities. On the other hand, the indirect impact may be as a result of the interest that the foreign investors may cultivate in doing business with the region when progressive growth are exemplified in many countries within the region. In the previous literature, there is near-consensus that manufacturing is the high road to development (see, Verspagen, 1999; Szirmai, 2013; Haraguchi et al, 2017).

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