Effect of Electricity Power Consumption on Economic Growth of Nigeria

Abstract

The aim of this study is to examine the effect of electricity consumption on Nigeria’s economic growth efforts from 1981 – 2012 with a view to proffering suggestions and recommendations where necessary. This study employs secondary data using the expanded Cobb Douglas production function; using 1990 as the base year. The Ordinary Least Square (OLS) is applied in the analysis of the model. Empirically, we find that there is a positive linear relationship between GDP and GFCF, ELEC, EXCH and LABF, while an inverse linear relationship exists between INDO, INF, INT and GDP. The Adjusted R2
is 98.7% variation in the dependent variable (GDP). Individual test shows that GFCF and EXCH are statistically significant, while electricity consumption; industrial output, labour force, interest rate and inflation are not significant. This means that both electricity consumption and industrial output do not have positive impact on economic growth in Nigeria, hence, is responsible for the low level of industrialization in Nigeria. The ADF result shows a unit root among the variables at first difference, except for inflation, that is at level. The variables in the model are co-integrated showing a long–run unidirectional casualty. Again, the variables have joint significant effect on GDP in Nigeria. This study recommends among others the diversification of energy resources.