Determinants of Electricity Demand in Nigeria: A Non-Linear Autoregressive Distributed Lag (NARDL) Analysis

Abstract

The study empirically identifies determinants of electricity demand in Nigeria while taking into account their long run effects on the nation. Secondary data covering a time frame of thirty eight (38) years (1980- 2018) were used in the study. In order to investigate the asymmetric and nonlinear long-term effects of determinants of electricity demand on its consumption, the study adopts the multivariate nonlinear ARDL method propounded by Shin et al. (2014). Results show that negative shock in the average price of electricity leads to increased electricity demand however; positive shock does not decrease electricity demand either. A percentage increase in Electricity Access causes electricity demand to rise by 3.4% while its reduction causes electricity demand to reduce by 6.26%. A percentage increase in power supply enhances electricity demand to rise by more than hundred percent, while its reduction causes electricity demand to drop. At 5% level of significance Wald test confirms that positive and negative shocks among the variables are not the same in the long run. Also the series never experienced structural break. The study recommends tenacious government effort towards improving electricity supply and access rate beyond the current rate (56.5%.), rather than influencing tariff that is being charged.