Energy Requirements and Industrial Growth in Nigeria: An Empirical Investigation

1. Energy Requirements and Industrial Growth in Nigeria: An Empirical Investigation By Elijah Udoh & Nsikak Joshua

2. INTRODUCTION • Industrial development has been upheld as a catalyst for any economy wishing to move from a non-industrialized state to an industrialized one. • Several factors have been identified as push factors for industrial growth one of which is availability of energy resources. • Although, traditional growth theories have failed to include energy as a conventional factor of production, yet the imperative of energy makes most energy economist to now consider it as an important factor of production.

3. INTRODUCTION CONT. • In Nigeria, industrial sector has not performed well due to several factors including infrastructural deficit, particularly inefficient energy supply. • The objective of this study is to critically examine the relationship between energy requirements and industrial sector growth in Nigeria.

4. LITERATURE REVIEW • Large amount of studies exist examining the relationship between energy consumption and economic growth. Findings from the majority of these studies showed that energy consumption has positive effect on economic growth. • However, studies on the relationship between energy consumption and industrial output are few. Available studies in this regard included Sari, et al (2008) for United States, Ziramba (2009) for South Africa, Knetsch and Molzahn (2009) for Germany, and Qazi et al (2012) for Pakistan, among others. • Studies for Nigeria are scanty and this is the gap the study attempts to fill.

5. ANALYSIS OF ENERGY CONSUMPTION PROFILE IN NIGERIA Table 1: Energy Consumption in Nigeria (Tonnes of coal equivalent)

6. Table 2: Share of Energy Source in Total Energy Consumption in Nigeria.

7. Figure 1: Electricity Consumption in Nigeria

8. ANALYSIS OF INDUSTRIAL SECTOR PERFORMANCE IN NIGERIA Table 3: Comparative Analysis of the Performance of the Industrial Sector in Nigeria

9. METHODOLOGY & DATA • The empirical model for this study is specified as: INDOUT=f(COALCON, ELECON, GASCON, OILCON,HYDROCON) Where: INDOUT = Industrial output; COALCON = Coal consumption ELECON = Electricity consumption; GASCON = Gas consumption OILCON = Petroleum products consumption; HYDROCON = Hydro power consumption. • Data used for the estimation were obtained from Central Bank of Nigeria Statistical Bulletin and Annual Reports and Statement of Accounts for various years.

10. EMPIRICAL RESULTS • The Unit Root Tests Tables 5 & 6 below present the unit root tests results Table 5: Test for unit root using Augmented Dickey-Fuller (ADF) Test The results of ADF test above shows that all variables were stationary at first difference

11. Table 6: Test for unit root using Phillip-Perron (PP) Test The results of the PP test as presented in table 6 above show that only one variable (COALCON) was stationary at level. All variables were however stationary when the series was differenced once.

12. JOHANSEN COINTEGRATION TEST • Table 7: Cointegration Test The results of the cointegration test as presented above revealed at most two cointegration equations at 5% level. This shows that there exists a long run relationship among the variables in the model.

13. RESULTS OF THE LONG RUN ESTIMATES • Table 8: The Long Run Estimation Note: * denotes significance at 5% level

14. RESULTS OF THE SHORT RUN ESTIMATION Table 9: Parsimonious short run dynamic estimation Note: * denotes significance at 5% level

15. RESULTS OF THE SHORT RUN ESTIMATION CONT. • The results of the short run dynamics showed that first and second period lagged of electricity and natural gas consumption have negative impact on industrial output in Nigeria. • results shows that the second period lagged of hydro power consumption is the only variable that has a positive effect on industrial output in Nigeria . • The error correction factor is correctly signed and also statistically significant as expected. About 54% of the deviation from equilibrium was corrected within one year.

16. CONCLUSION • This study examines the impact of energy requirements on industrial growth in Nigeria for the periods covering from 1970 to 2011. • It is obvious from the results obtained that except for hydro power, other energy sources such as electricity and coal have negative impact on industrial output in Nigeria. • The study recommends that policy makers should begin to think about the use of alternative energy sources such as solar, wind and other renewable energy sources; efforts should be intensified in making sure that the power sector is up and doing; there is need to utilize the abundance of natural gas available in the country rather than flaring it, while efforts should be focused on revitalizing the various hydro power projects in Nigeria.

17. Thank You for Your Attention