Power Supply Efficiency and Economic Growth in Nigeria

International Journal of Research and Scientific Innovation (IJRSI) | Volume VI, Issue VIII, August 2019 | ISSN 2321–2705

Power Supply Efficiency and Economic Growth in Nigeria

David-Wayas, O.M.¹, Chukwuma, Q.O². & Ohajiudu, J.C.³

^1,2,3Department of Economics, University of Nigeria, Nsukka, Nigeria

Abstract -This paper examines the causal relationship between power supply efficiency and economic growth in Nigeria. Granger causality and co-integration tests were employed using annual data from 1985 to 2015. The results show a bi-directional causality running from energy production to GDP and from GDP to energy production. The finding also shows a long run relationship between the selected variables. These results strongly contradict the neoclassical perspective that energy consumption is not a limiting factor in economic growth in Nigeria. The implication of the findings is that any policy to reduce energy production from oil, coal and gas aimed at reducing greenhouse gas emissions is likely to have a detrimental impact on the nations GDP because this source causes more growth to the GDP at the moment. Nonetheless, more investment on renewable sources should be encouraged since it also contributes positively to GDP. The study recommends the need for the deregulation of the downstream sector to attract more investments.

Key words – Power supply, efficiency, production, economic growth

I. INTRODUCTION

Power supply is gradually becoming a major factor in the pursuit of economic development. The attainment of economic growth is a necessary but not a sufficient condition for nations to attain an improved social welfare for its citizens. As growth is achieved, more principal policies should be in place to translate this growth into the living standard of the citizens. A good electricity supply not only improves the quality of life of its users, but also has the potential to improve the industrial output of a country and therefore, can have positive impacts on a country’s growth and development prospects.
Nigeria has the biggest gap in the world between electricity demand and supply, providing its population of over 160 million with less than 4000 megawatts of electricity. In contrast, South Africa with a population of less than 50 million people generates more than 40,000 megawatts while Brazil, an emerging economy like Nigeria, generates over 100,000 megawatts for its 201 million citizens. Indeed, the gap in the power sector has implications for improving the business climate, sustaining economic growth and the social wellbeing of Nigerians.

Read More