Abstract
Poor energy production and consumption bedevils the state of Nigeria, for which distribution of energy is concentrated in the wealthy and urban middle class with the country's large poor population denied access. The current annual production is very low, and development of the sector is a challenge. Basically, additional infrastructure is needed to increase production which can feasibly be acquired through raising energy prices. However, a rise in price prohibits access to services for a large part of the population. Inability to raise energy production has a substantial impact on individuals and businesses alike. For businesses, frequent power outages bring inefficiency in the production of goods and services, resulting in stunted growth for local companies and discouraging international investors. For individuals, poor energy consumption impacts negatively on living standards. The accumulative effect of poor energy production and consumption over the years can greatly impact on the continent's economic growth and development. Present economic conditions may worsen with high population growth and rising urbanisation, hence, the need for a rapid and intensified strategy for energy development of the nation. Consequently, this study analyses the relationship between energy consumption on the one hand and economic growth, industry growth and urban growth for the nation. Using data for the period 1980-2016, a VEC model is analysed with the Granger causality test, impulse response function and variance decomposition. Using the Johansen cointegration test, one cointegrating relationship is found which led to conducting the VECM. It is found that a long run causal relationship exists only for GDP growth. That is, GDP only possess the correct sign and statistically significant level with the speed of adjustment back to equilibrium at 14 per cent. No short-run causal relationship is observed between energy consumption on the one hand and economic growth, industry growth and urban growth. Only FDI as a control variable has a bidirectional short-run causal relationship with energy consumption.Keywords: Energy Production, Economic Development, Industrialization, Urbanization, Energy ChallengesJEL Classifications: L38, L51, L98DOI: https://doi.org/10.32479/ijeep.8175
Highlights
Rising urbanisation, industrialisation, insecurity, political violence, and rising unemployment are some of the several issues confronting the African continent, and Nigeria and a fast-growing population may compound issues for the nation
The relationship between energy consumption and economic variables especially economic growth has been studied since the 1970s since the oil crises, but the empirical result is inconclusive as regards if energy consumption causes economic growth or vice versa (Ozturk, 2010)
It is found that there exists a long-term relationship between these variables and that significant effects of economic growth, industrialisation and financial development (FD) exists on energy consumption, no significant relationship is observed in the case of urbanisation and energy consumption
Summary
Industrialisation, insecurity, political violence, and rising unemployment are some of the several issues confronting the African continent, and Nigeria and a fast-growing population may compound issues for the nation. Nigeria is the 7th largest country in the world with a population of over 185 million people (WDI, 2017) and it is projected to be the 3rd largest country by 2050 just after China and India, with a population of over 240 million people (UN, 2017) Given these projections challenges and opportunities are abound. As Nigeria’s urban population rises numerous challenges arise in meeting the needs of the growing population which includes education, health care, housing infrastructure, employment and energy. Given the rising trend in population growth and urbanisation, industrialisation in Africa and in Nigeria is inevitable. Given the projected rise in Nigeria population to about 240 million by 2050 (UN, 2014) and the forecast that the country’s economy will grow to over $1.6 trillion by 2030 (McKinsey Global Institute, 2014) obviously industrialisation is inevitable. Urbanisation and industrialisation may put pressure on economic growth and subsequently energy consumption. In the section that follows, past papers on the topic are reviewed for countries across the world, the third section presents the methodology and analysis of results, and the fourth section concludes the paper
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