Abstract
The relationship between economic development and energy in Nigeria is examined in this work. An econometric model is developed to ccount for the factors affecting economic growth and development in the country. The results show that the variables have long memory and all except electricity consumption are non-mean reverting. The series are heterogeneous with respect to the order of integration. Using OLS regressions with fractionally integrated errors, we found that electricity consumption, oil prices, electricity prices, real interest rate and employment affect GDP per capita with only real interest rate having a negative relationship. Policy recommendations are proposed in the article.
Highlights
The argument on the importance of energy in development economics is still a thing of contention
We have investigated a group of variables related with economic growth and development in Nigeria
High levels of persistence were found in the cases of gross domestic product (GDP) PC and EMPLOYMENT, with orders of integration about 1; for the remaining series, Oil export (OILEXP), OILPRICE, electricity price (EPRICE), ERER, and ranging from low levels of persistence (RIR), the unit root hypothesis, i.e., d = 1, cannot be rejected though for the latter series, the interval is so wide that even the I(0) hypothesis could not be rejected
Summary
The argument on the importance of energy in development economics is still a thing of contention. Empirical works have churn out varying results: some have supported the view that energy complements other factors of production, while others have argued against this assertion by supporting that energy can substitute for other production factors. The need to investigate the relation between economic growth and energy comes from the increasing of energy for the economic development of nations. This might question the neoclassical production function where labour, land and capital are recognized as the main production factors. Authors such as Griffin (1979) found energy and capital to be substitutable
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