Demand for electricity in Nigeria: Some empirical findings

Abstract

This paper presents the findings from an econometric model of Nigerian electricity demand. Electricity consumers are partitioned into three classes-namely. Residential, Commercial and Industrial. It shows that over the last two decades there has been tremendous increase in both the supply and demand for electric energy. Although supply has increased, it has not been able to keep pace with demand. Various explanatory variables that determine changes in demand are analysed for each of the three consuming sectors. The findings are as follows. (i) Per capital income, previous level of electricity consumption and urbanization are the most significant explanatory variables for the Residential sector's electricity consumption. The short and long-run income elasticities are found to be below unity, while whose of urbanization are above unity. The average price of electricity, though rightly signed, was found to be insignificant. (ii) As regards the commercial sector, the significant explanatory variables were previous level of electricity consumption, income, average price of electricity and urbanization. Urbanization was, however, found to be the most sensitive variable in respect to changes in the sector's electricity demand. (iii) Previous level of industrial electricity consumption and degree of urbanization were the main explanatory variables for changes in the Industrial sector's demand for electricity. Industrial output and income were not found to be significant variables in explaining changes in the Industrial sector's demand for electricity.