Macroeconomic Drivers of Electricity Prices in Nigeria

Mansur Bala, Nasir Ahmad Moyi and Umar Muhammad Gummi
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Mansur Bala: Department of Economics, Sokoto State University, Sokoto, Nigeria
Nasir Ahmad Moyi: Department of Economics, Sokoto State University, Sokoto, Nigeria
Umar Muhammad Gummi: Department of Economics, Sokoto State University, Sokoto, Nigeria

Energy Technologies and Environment, 2024, vol. 2, issue 3, 17-33

Abstract: Electricity price volatility in developing economies, particularly Nigeria, presents a significant challenge to sustainable development. In this paper, we examine the macroeconomic drivers of electricity prices (ELP) in Nigeria based on annual data spanning 1980-2022 and the autoregressive distributed lag (ARDL) procedure. Our model estimates the long-run and short-run impacts of population growth (PG), economic growth (GDP), crude oil price (COPR), and electricity consumption (ELC) on electricity prices (ELP). The empirical findings reveal a positive and long-run effect of PG on ELP, indicating that rising demand from a growing population increases electricity prices. In the short-run, ELC surprisingly co-moved with ELP, which may be attributable to price-sensitive demand within specific consumer segments or periods. Furthermore, GDP and COPR exert positive effects on ELP, indicating that economic growth drives energy consumption and prices, and the cost-driven impact of fossil fuel dependence in electricity generation. These findings shed light on the complex interplay of demographic, economic, and energy market-related forces driving electricity prices in Nigeria. Therefore, the paper proposes some policy suggestions based on the empirical findings.

Keywords: Electricity Price; Gross Domestic Product; Population Growth; Crude Oil Price; Electricity Consumption; Autoregressive Distributed Lag Model (search for similar items in EconPapers)
Date: 2024
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