Energy Consumption and Economic Growth in Nigeria

The study examined energy consumption and economic growth in Nigeria using time series data for the period of 1986 to 2020. The specific objectives of the study were to ascertain the effect of electricity consumption on economic growth in Nigeria, to find out the effect of premium motor spirit (PMS) consumption on economic growth in Nigeria and to assess the causal relationship between energy consumption and economic growth in Nigeria. It used Autoregressive Distributed Lag (ARDL) to achieve objective one and Granger Causality test to achieve objective three. Based on objective one, the result showed increase in electricity consumption led to decrease in Gross Domestic Product (GDP) in Nigeria. As a result, electricity consumption had a significant negative effect on Gross Domestic Product (GDP) in Nigeria. Therefore, despite government claim of increase in electricity consumption, there was still decline in economic growth in Nigeria within the study period. Also, based on objective two, it was revealed increase in premium motor spirit consumption led to increase in Gross Domestic Product (GDP) in Nigeria. As a result, premium motor spirit consumption had a significant negative effect on Gross Domestic Product (GDP) in Nigeria. Therefore, despite government claim of increase in premium motor spirit consumption, there was still decline in economic growth in Nigeria within the study period. Based on objective three, it was revealed that a bi-directional relationship sufficed between energy consumption and economic growth in Nigeria. The study therefore recommended that government should make adequate provision to enhance electricity consumption towards boosting economic growth in the Nigerian economy. This could be achieved if federal government improves on energy generation, energy transmission and energy distribution to boost its consumption among economic agents such as; households, firms, markets and government itself. Government should employ tactical policies to enhance premium motor spirit consumption and the consumption of other energy sources such as; coal and natural gas towards boosting economic growth in Nigeria. This could be achieved if federal government improves on energy generation, energy transmission and energy distribution to boost its consumption among economic agents such as; households, firms, markets and government itself. Finally, since a bidirectional relationship sufficed between energy consumption and economic growth, policy makers should develop two-way dimensional model to predict economic growth from the lens of energy consumption sources like; electricity, premium motor spirit, coal and natural gas towards achieving economic growth and vice versa.