Abstract
The study investigated the effects of electricity consumption on capacity utilization in Nigeria from 1981 to 2017. The study made use of annual time series data which were sourced from Central Bank of Nigeria (CBN) Statistical Bulletin (2018) and World Development Indicators (WDI). Unit root test of Augmented Dickey-fuller (ADF) and Philip Perron (PP) were used for preliminary test with Johansen co-integration test. The study employed Normalized co-integration and vector error correction mechanism in analyzing the data. The unit root results indicated that all variables were stationary at differenced of order I(1), while co-integration established a long run relationship among the variables. The normalized co-integration finding revealed that lnelec, lncabem and lnelecge have positive impact on the lncpu while lncrind and lnecp have negative impact on lncpu, on average. The coefficients of lnelec, lnecp and lnelecge were statistically significant at 5% and 1% levels of significance. Vector error correction mechanism technique showed that a unit rises in inelec, incabem and inelecge decreases incpu by 0.96 percent, 0.20 percent and 0.55 percent respectively on average in the long run while a percentage change in inelec, incabem and inelecge decreases lncpu by 0.186, 0.020 and 0.125 percent respectively on average, ceteris paribus in the short run. Therefore, the study recommended policies aimed at providing reliable and stable power supply thereby creating avenue for maximum capacity utilization in Nigeria industries.Keywords: Electricity consumption, Capacity utilization, Electricity generatedJEL Classifications: L94, O14, Q41DOI: https://doi.org/10.32479/ijeep.10580
Highlights
Nigeria’s industrials sector is faced with low level of capacity utilization as a result of increased shortage of power supply
Result of the Unit Root Test Both tests of unit root employed in this study Augmented Dickeyfuller (ADF) and Philip Perron (PP) indicate that the variables are non-stationary
This implies that a unit rise in commercial bank credit to industries increases capacity utilization by 6% which suggests that credit to industries has not contributed enough to enhance capacity utilization in Nigeria
Summary
Nigeria’s industrials sector is faced with low level of capacity utilization as a result of increased shortage of power supply. Electricity supply to all sectors of the Nigerian economy has been very unreliable over the years which had attracted the attention of scholars. Nigeria has recorded a great history of unstable and inadequate electric power supply. This problem became more acute in manufacturing sector as the number of manufacturing firms leaving the country and shutting down became more pronounced. Yakubu et al (2015) established that close to a thousand companied shut down in Nigeria and moved to countries where there is better services electricity services. The problem of erratic power supply in Nigeria has virtually affected all the major sectors of the economy and devastated the manufacturing sector. It is noticeable that the manufacturing installed capacity in Nigeria not operating at maximum level. There is drastic shortfall of electricity consumption which escalated the cost of production in the sector
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