Abstract
The purpose of this paper is to examine the causal relationship between energy consumption and National income of Nigeria. The importance of identifying the direction of causality emanates from its relevance in national policy-making issues regarding energy conservation. There are various evidences indicating some level of relation between national income and energy consumption of many countries: developed, developing, and third world alike. A relation that energy consumption enhances national income has been documented by Rakhshan for Canada, China, Japan (poor positive relation due to its efficient and successful energy conservation policy over the past decades), Iran, and Russia. More so, Amirat and Bouri found similar relation for Algerian Case. Also, Huang, Hwang, and Yang found no causal relationship between energy consumption and economic growth in the low income group whereas in the middle income groups, economic growth enhances energy consumption; and in the high income group countries, economic growth negatively affects energy consumption due to great environmental improvement impacts. On the other hand, a neutral relation between energy consumption and national income has also been verified to exist in Turkey according to Yalta's study. Therefore this paper evaluate the relationship between energy consumption and national income in Nigeria for the periods 1990 to 2010. Pearson correlation coefficient was used to determine the nature of the relationship that exist between energy consumption and national income while Granger causality test was employed to identify the direction of the relationship. The variables that were used include national income measured by GDP, energy consumption measured by its index, capital input and manufacturing capacity utilization. The energy combined includes coal, electricity (hydro-power), natural gas and petroleum products. Key words: National income, energy consumption, economic growth.
Highlights
National income of any given country, in the words of Alfred Marshall, is the outcome of the activities undertaken by the factors of production using other natural resources in the production process measured in a given period of time
Given that the nature of relation between energy consumption and national income differ among countries, and few existed for the Nigerian case; this paper aim to investigate the kind of energy consumption and national income relationship in Nigeria
Five variables were examined for the nature and extent of relationship that may exist between energy consumption and economic growth in Nigeria
Summary
National income of any given country, in the words of Alfred Marshall, is the outcome of the activities undertaken by the factors of production using other natural resources in the production process measured in a given period of time. The traditional Rostow’s stages of growth theory emphasizes on the importance of the production technique (traditional or modern tools/equipment) as one of the major determinants of the developmental progress of the economy (Rostow, 1960). This is vividly demonstrated by the outcomes in the production sector since the industrial revolution of the 20th century.
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