Electricity Production, Consumption, and Manufacturing Sector Performance in Nigeria: A Multi-Decade Analysis

Kafilah Gold (), Kamaldeen Olarewaju Adetunji, Hammed Agboola Yusuf and Sabirah Sulaiman

Journal of Applied Economic Research, 2024, vol. 23, issue 4, 1077-1098

Abstract: Electricity is a crucial factor in modern manufacturing processes, but erratic power supply hampers the efficiency of Nigeria's manufacturing sector. This research examines electricity production, consumption and its impact on Nigeria’s industrial output, exploring the relationship between power availability and economic and industrial advancement. We hypothesise a significant long-term relationship exists between electricity production/consumption and manufacturing sector output in Nigeria. The time series data from 1985 to 2018 and the Autoregressive Distributed Lag (ARDL) bounds testing technique for cointegration were used. Our findings reveal long-term relationships between the variables, indicating that manufacturing output benefits from electricity in the short and long term. However, this effect only becomes statistically significant over time. A multiple regression model also shows that interest rate, inflation rate, electricity, and gross fixed capital formation variables are positively associated with economic development. These results have significant policy implications, demonstrating that increasing the electricity supply is essential for boosting productivity in the manufacturing sector. Moreover, to achieve Nigeria's economic goal of becoming one of the world's 20 largest industrialised economies, a consistent and sufficient increase in energy supply, particularly to the manufacturing sector, must be a steadfast policy. Economic growth appears to be closely linked to energy consumption. Therefore, to foster economic growth, it is recommended that industrial development and electricity generation issues be prioritised, especially in budget planning. A substantial allocation should be made to the electricity sector to permanently improve the state of the electricity supply, which in turn will support overall economic development.

Keywords: electricity production; manufacturing sector; factors of production; output; Nigeria (search for similar items in EconPapers)
JEL-codes: C22 F43 O14 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:aiy:jnjaer:v:23:y:2024:i:4:p:1077-1098

DOI: 10.15826/vestnik.2024.23.4.042

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