Relating Electricity Differentials to Nigeria per Capita Income: A Distributed Lag Approach

Abstract

The purpose of this study is to proffer an explanation of comparative low per capita income in Nigeria using data on electricity loss. We hypothesized that per capita income is a function of electricity loss which we defined as the differential between actual electricity generated and actual electricity consumed. Using time series data from 1970 to 2005, we estimated a distributed lag model with Newey-West HAC standard errors. From the estimated model which was truncated at three lag lengths, we established an inverse relationship between per capita income and total electricity loss with all the distributed lag variables being statistically significant. The implication of this result is that electricity loss generally affect national output negatively which in turn reduces our per capita (income of the people). Policy measures that will ensure adequate protection and system stability of the existing fragile transmission and distribution network, the strengthening and expansion of the transmission and distribution infrastructure will reduce electricity loss and eventually improve our per capita income.