The Role of the National Gas Policy on the Nigerian Electricity Supply Industry and Economic Growth

Abstract

This study examined the relationship between real GDP, electricity supply, and the National Gas Policy (NGP) in Nigeria, using annual time series data from 1981 to 2019. To achieve its aim, the study explores how the NGP might influence future economic growth, natural gas reserves and electricity supply. Econometric techniques are employed for analysis, where real GDP is dependent variable, and the NGP is the dummy explanatory variable alongside other explanatory variables. The Augmented Dickey-Fuller and Phillip Perron Methods were used for unit root tests. The ARDL bounds tests indicated evidence of co-integration and long-run relationships among the variables. From the results, electricity supply and the NGP have a positive and significant relationship with real GDP. Consumer Price Index (CPI), a control variable, had a negative and significant relationship with real GDP in the short run. Also, the Error Correction Term is -0.2228. Consequently, the speed of adjustment for the model to return to long-run equilibrium after a shock is 22.28%. The study also found that the current two (2) percent annual growth rate of proven NG reserves is inadequate to cater for the rapid growth in the NG sector considering the positive effect of the NGP. The study, therefore, recommends that policymakers should continue to promote the NGP programme because it contributes positively to real GDP. In addition, consideration should be given to a diverse energy mix policy to reduce the over-reliance of electricity generation on NG-fired power plants, consequently, policymakers should promote policies that will lead to the diversification of the energy source for power generation.