On Nigeria's renewable energy program: Examining the effectiveness, substitution potential, and the impact on national output

Abstract

Considering the objectives of Nigeria's Renewable Energy Program, three basic questions are asked in this study: Can Nigeria really build its economy on renewable energy? Is it possible to substitute nonrenewable energy for renewable energy? What is the impact of renewable energy on the economy? This study primarily analyzes renewable energy development in Nigeria. Among other things, we estimate the economic impact, output elasticity, and the substitution possibilities of both renewable and nonrenewable energies. Our findings, based on a dataset from 1980 to 2015, in the framework of the translog production function, show that capital and labor are the main drivers of output in Nigeria; however, the economic impact of both energy types (renewable and nonrenewable) are insignificant, even though positive. With output and substitution elasticities being positive, this study confirms the possibility of moving towards a renewable power generation, but also highlights the limitation associated with such transition, citing inherent problems such as power density and scale, cost, and location. Based on Nigeria's economic and industrialization agenda, this study agrees with the respective strategies enshrined in the Renewable Energy Program but recommends that its implementation should be gradual and in accordance with Nigeria's economic goals.