Abstract
Over the years, demand for electricity has continued to grow while supply has consistently declined. The shortages of electricity supply formed the major background for energy crisis in Nigeria. The reason for this is that, all efforts are concentrated at generating electricity from only two major sources, namely: hydropower and gas. Therefore, this study investigated the effects of electricity consumption and its implications on industrial performance in Nigeria. Time series data were used for the study, sourced from the Central Bank of Nigeria Annual Report, Statistical Bulletin, Publications of the International Monetary Fund and the National Bureau of Statistics which spanned from 1981 to 2019. The study employed Fully Modified Ordinary Least Squares Method and Descriptive Statistics to carry out the empirical analysis. The findings revealed that a unit rise in industrial electricity consumption and exchange rate contribute to industrial performance by 9.4% and 44% respectively. This indicator only reflects marginal impact of industrial performance in Nigeria compare to other countries. However, a percentage increase in gross fixed capital formation and gross domestic product reduced industrial performance by 0.018% and 0.020%. Meanwhile, capacity utilization signed positive but not statistically significant. The study concluded that irregular electricity supply has weakened industrial performance in Nigeria despite various energy resources available. Therefore, the study recommended well rounded energy mix option through government policies to complement the existing energy sources available in Nigeria, as well, as other renewable energy resources for industrial sector and domestic use.
Highlights
Over the years, Nigeria industrial development has been bedeviled by myriads of problems top among which is the erratic nature of electricity supply in the power sector
The Augmented Dickey Fuller (ADF) Unit Roof Test is used because of its superiority over the Dickey-Fuller (DF) Lest, In the ADF test, the more negative it is, the stronger the rejection of the Hypothesis that there is a unit root at some level of confidence Third, the Johansen Co-integration test is to check whether the regression residuals are co-integrated, that is, to test whether there is a long-run relationship between dependent and independent variables in the model, Lastly, fully modified least squares method (FMQLS) is use to account for serial correlation effects and for the endogeneity in the regressors that results from the existence of a co-integrating relationship
The unit root test confirmed that gross fixed capital formation, gross domestic product, exchange rate and capacity utilization were stationary at level while industrial output and industrial electricity consumption become stationary at first difference
Summary
Nigeria industrial development has been bedeviled by myriads of problems top among which is the erratic nature of electricity supply in the power sector. Over the last four decades, the gap between energy-supply and demand in Nigeria has been growing and is expected to continue, Inefficiency to boost electricity-supply has been responsible for the gap between the demand and supply of electric-power due to the poor maintenance of existing hydro-plants, and the loss of power transmission in Nigeria Indicators such as constant blackouts and persistent reliance on self-generating plants are pointers to underutilization of resources in Nigeria industrial sector. Ekpo (2009) elaborated on the folly of running generator economy and its adverse effects on investment He strongly argued that for Nigeria to jump start and accelerate the pace of economic growth and development, the country should fix power supply problem. Aigbokan (1999) opined that fixing the energy sector is tantamount to shifting the production possibility curve of the country’s economy
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