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Keywords: Electricity
consumption, Economic growth, Distribution losses, Power generation.
INTRODUCTION
Nigeria has experienced problems
in the area of power generation, transmission and distribution. The extent of
this is underlined by the fact that Nigeria is the largest purchaser of standby electricity generating plants in the world (Braimoh & Okedeyi, 2010).
The inefficiency as well as
inadequate facilities to boost electricity supply in the face of increasing
population new and electronic based technologies, vast geographical landscape
and an increasing business environment all combines to create electricity
supply problems, While the demand for electricity is on the increase, supply
tends to be falling. It is significant to note that any shock in the energy
sector affects the level of productivity, profitability, income and employment
opportunity and this is inadvertently link with national security, citizen
safety, social order and health of the people who live in Nigeria (Unduma,
2009). The poor or near absence of physical infrastructure was also identified
as a major problem.
This study concentrates its focus
on the determinants of electricity supply in a developing economy as Nigeria.
Focus on impacts of electricity supply is however borne out of the imperative
of electric energy as a vital source of economic growth of a country.
Jonah et al.
(2013) investigates the impact of electric energy supply on economic growth of
Nigeria between 1970 and 2010. Data for the study were obtained from the
reports and bulletins of Central Bank or Nigeria. The study adopted multiple
regression analysis and modern econometric methodology. The result from the
study showed that electricity supply in Nigeria does not significantly impact
on industrial productivity and economic growth of the country. However, the ADF
tests result indicated that all the variables for the study were stationary at
first equilibrium line point of -0.945. This result depicts the poor state of
electricity supply in the country because economic expectations are that
electricity supply should contribute positively and significantly to economic
growth.
Contrary views on
the strength of contribution of electricity supply in Nigerian were given in
Ubi & Effiong (2013). They studied the relationship between electricity
supply and economic growth in the country. Time series data for the study were
analyzed using modern econometric technique. The result indicated that despite
poor state of electricity supply in the country, it influences economic
developments although its impact is relatively very low. Based on this, they
recommend among other that more power project should be completed. i.e more
electricity generation effort should be made.
Similar study in African Eggoh
(2018) in his study of energy consumption and economic growth revisited in
Africa countries with 21 African countries as the scope of study covering the
period 1970 to 2006. Using the bound analysis points out that there is a
long-run equilibrium relationship between GDP and energy consumption. It was pounding
that decreasing energy consumption decrease growth and vice versa.
Having empirically reviewed the
related work, it is worthwhile to point out that the studies so far provide
mixed and conflicting evidence with respect to energy consumption and economic
growth. This divergent can be attributed to different factor i.e variable,
choices, estimation techniques, time frame with quantity and quality of data
used and developmental stage of different economics. It is also relevant to
observe that the majority of the past work is of analysis of energy
(electricity) on economic growth neglected the conventional or prime determine
of economic growth in the estimation model there by leading to the bias result
due to the omission of variables.
The research work performed an
extensive review of literature consisting of prior studies on electricity
classifying it in three broader heads namely; Electricity consumption,
Electricity generation, electricity distribution losses.
The work however embodies the
combined significance of three independent variables; electricity consumption,
generation and distribution losses and how it affects economic growth from 1971
to 2018 in extension.
RESEARCH METHOD
In the model, the
independent variable is RGDP representing Economic Growth, While the
Independent variables are Electricity Consumption, Electricity eneration and
Electricity Distribution losses.
The functional
form of the model is specified below as:
GDP = f (EC, EG, ED)……… (8)
Where:
GDP – Gross Domestic Product representing Economic GrowthEconomic Growth, EC – Electricity Consumption
EG – Electricity Generation, ED– Electricity
power transmission and Distribution losses
Mathematical form
of the model is specified as
GDP=B0 + B1EC + B2EG + B3ED………. (9)
Econometric
Relationship
GDPt= B0 +
B1ECt-i + B2EGt-i + B3EDt-i+
B4GDPt-i+A1ECt-1+ A2EGt-1+
A3EDt-1+ A4GDPt-1+ Ut……………(10)
· Where
B0=intercept,B1,B2, B3,B4=
Parameters for short-run dynamics
The method of
data analysis used for this project work is the long run autoregressive
distributive lag model.
From the result presented, it was found that all the time series are trended. The unit root at level result is summarized in the first panel (i.e. level panel) of table. From the unit root result, we observed that the absolute ADF test statistics for three out of the time series are insignificant 5% level of significance. This implies that not all the time series have unit root at level, hence, the need to difference the time series that were not stationary at levels and conduct the test again. From the result presented in the second panel (i.e. first difference panel) of table, it was observed that absolute ADF test statistics for three series were significant 5% level of significance. This implies that not all the time series have unit root at level. Hence the time series exhibited a mix of order of integration (Table 2).
Cointegration test (Table 3)
The most appropriate cointegration test for series that are of
different order of integration is the one proposed by
Pesaran, Shin & Smith (2001) defined as bounds cointegration test. Since
the calculated F-statistic is greater than the 5% critical value bounds for the
upper bound I (1) (i.e. 10.77˃4.35), then we can conclude that there is
cointegration; there is a long-run relationship between the time series. The
study therefore proceeded to estimate the both ARDL long-run and short-run
dynamics.
Model estimation
The
order of lag in the ARDL process for the model is automatically decided based
on Schwarz criterion (SC) and the short and long run behaviours of the
explanatory variables are reported respectively in the upper and lower panels
(Panels A and B) of
From the short run analysis of ARDL it is seen that
electricity generation has a negative and significant impact on GDP.
Electricity power transmission and distribution losses is insignificant with
GDP in the current year and also insignificant in the previous and last two
years but it was significant in the last three years but it has a negative
relationship with GDP. Electricity consumption has a positive and significant
relationship with GDP.
In
the long-run electricity generation has a negative and significant impact on
GDP. Electricity power transmission and distribution losses have a positive but
insignificant impact on GDP in the long run. Electricity consumption has a
positive and significant impact on GDP.
Post estimation
test (Table
5)
CONCLUSION AND RECOMMENDATION
In the light of the above, we found out that electricity generation has a negative and significant effect on economic growth both in the short run and long-run, which means a unit increase in electricity generation would bring about a unit decrease on economic growth; which do not conform with a prirori expectation.in this part of the world, there is no enough electricity generated to meet the need of the teeming generation- electricity generated faces fluctuations (mostly downward)
. This has forced residents, especially industries to seek for alternative sources of generating electricity; generators, plants, inverters, solar energy, etc. Electricity consumption shows that a unit change on electricity consumption would bring about a unit increase on economic growth. The regression analysis further shows that an electricity power transmission and distribution loss is insignificant to economic growth. As a result of the findings, this study recommends that the government should ensure that energy generated in the country is improved and that electricity generation should be on a sustainable increasing trend backed up with optimal production and utilization such that there is sustainable and continuous increase in output and utility in the household and business levels, hence, increased consumption.
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Table 1 -
Table 2
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Table 3
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Table 4
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Table 5
