Energy Consumption and Economic Development in Nigeria

Abstract

Energy policy has become a useful tool in the hand of government across the globe in other to stabilize and enhance economic growth and development. Hence, this study examined the effect of energy consumption on economic development in Nigeria from 1990-2023. The study uses time series data obtained from Global energy Database, Central Bank of Nigeria Statistical Bulletins and World Bank Development Indicators, 2024 respectively. The study applied Augmented Dickey Fuller (ADF)unit root test technique for stationarity test of the variable under study and it revealed that I (1) and I(0) order of integration exist among the studied variables which necessitated the choice of Autoregressive Distributed Lag model (ARDL). Also, the cointegration result revealed that long run equilibrium existed among human capital development index and energy consumption components in Nigeria. The main ARDL result revealed that electricity and Petroleum energy consumption have positive effect on economic development in Nigeria while Coal energy consumption has negative effect on economic development in Nigeria. This study concluded that energy consumption had significant positive effect on economic development in Nigeria. Based on the outcome of the study, it recommended that government should sustain the amount of electricity provided in order to promote economic development in Nigeria. In the same vein, the federal government should establish refineries and renewable energy funding/financing agencies such as to cater for the power sector. Similarly, Federal government should give more attention to coal production and its consumption for a better economy. Government as a matter of urgency should establish and implement the existing renewable biomass policy. Finally, government should place more priority on gas consumption to minimize the high cost of fossil fuel in Nigeria for sustainable economic development in the country.