Abstract
This study identifies the factors accountable for the historical growth trends in kerosene and liquefied petroleum gas (LPG) consumption in Cameroon households, thereby quantifying their short- and long-run effects for the period 1994-2014. ARDL bound test and Granger-causality following Toda-Yamamoto procedure under an augmented VAR framework are estimated. Empirical results validate the presence of a long-run equilibrium relationship on one hand between kerosene consumption, prices, income, and urbanization; and on the other hand between LPG consumption, prices, income, and urbanization. Prices, income and urbanization have significant positive impact on kerosene and LPG consumption both in the short- and long-runs, with evidence of high degree of fuel substitution from kerosene to LPG. Granger causality test show that there exists bidirectional causality between LPG consumption and income at the 5% significance level, whereas there is no causality between kerosene consumption and income. This means that an increase in LPG consumption affects economic growth with feedback effect. Consequently, supporting energy policies aimed at increasing LPG consumption while reducing kerosene consumption is achievable in Cameroon. Other captious policy measures and sensitive issues such as market liberalization, energy accretion programs and market competitiveness to upgrade availability, accessibility, distribution and extension of energy services are discussed.
Highlights
In sub-Saharan Africa (SSA), over 600 million people currently depend on so-called traditional energies such as firewood, coal, charcoal, wood residues, crop residues and animal dung for cooking, lighting and other heat applications (Nkue and Njomo, 2009; Olabisi et al, 2019)
As the P-value of 2.50% is less than the 5% significance level, we fail to accept the null hypothesis of no Granger causality from liquefied petroleum gas (LPG) consumption to economic growth at 5% test level
Still under the assumption of the model, we fail to accept the null hypothesis of no Granger causality from economic growth to LPG consumption at a 1% significance level
Summary
In sub-Saharan Africa (SSA), over 600 million people currently depend on so-called traditional energies such as firewood, coal, charcoal, wood residues, crop residues and animal dung for cooking, lighting and other heat applications (Nkue and Njomo, 2009; Olabisi et al, 2019). The study contributes to the current literature in several ways: (i) It examines the dynamics and causal connections between LPG and kerosene consumptions, their prices, income and level of urbanization in Cameroon from 1994-2014 implementing ARDL cointegration bounds test and Granger causality testing method through taking care of the stochastic features of the data; many captious policy measures and sensitive issues such as market liberalization to upgrade availability, accessibility, distribution and extension of energy services are discussed in this study; (ii) unlike earlier studies, variables are used in their growth form rather than in their simple ratio form in order to reveal the direction of movements of the variables in the period relative preceding period t–1; (iii) this study uses real income as a barometer of economic growth which is more associated to LPG and kerosene consumption; (iv) this study employs more recent data according to their availability; (v) the current situation of SONARA leaves much room for investors and marketers.
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