Electricity Consumption and Economic Growth in Nigeria:

A Causality Test Approach

Abstract

Despite the important role of electricity in the growth process of an economy, deficiencies abound in the Nigeria electricity sectors which constitute a major concern. The study therefore examines the link between electricity consumption and economic growth in Nigeria collated within the period 1981-2019. Other cofounding variables included in the study are gross capital formation, labour force and government consumption expenditure. We used a vector autoregressive based on the Toda-Yamamoto approach to provide the framework for empirical analysis. The causality test result shows that a causal link runs from economic growth to electricity consumption but not the other way around. In terms of relative importance, the result shows that capital stock is more important in the economic growth process than electricity consumption. In summary, long-run causality runs from economic growth to electricity 
consumption thus confirming the conservation hypothesis for Nigeria. Going by the results, reducing distribution and transmission losses can improve electricity conservation in Nigeria.