Effect of Economic Growth, Industrialization, and Urbanization on Energy Consumption in Nigeria: A Vector Error Correction Model Analysis

Abstract

Poor energy production and consumption bedevils the state of Nigeria, for which distribution of energy is concentrated in the wealthy and urban middle class with the country's large poor population denied access. The current annual production is very low, and development of the sector is a challenge. Basically, additional infrastructure is needed to increase production which can feasibly be acquired through raising energy prices. However, a rise in price prohibits access to services for a large part of the population. Inability to raise energy production has a substantial impact on individuals and businesses alike. For businesses, frequent power outages bring inefficiency in the production of goods and services, resulting in stunted growth for local companies and discouraging international investors. For individuals, poor energy consumption impacts negatively on living standards. The accumulative effect of poor energy production and consumption over the years can greatly impact on the continent's economic growth and development. Present economic conditions may worsen with high population growth and rising urbanisation, hence, the need for a rapid and intensified strategy for energy development of the nation. Consequently, this study analyses the relationship between energy consumption on the one hand and economic growth, industry growth and urban growth for the nation. Using data for the period 1980-2016, a VEC model is analysed with the Granger causality test, impulse response function and variance decomposition. Using the Johansen cointegration test, one cointegrating relationship is found which led to conducting the vector error correction model (VECM). It is found that a long run causal relationship exists only for gross domestic product (GDP) growth. That is, GDP only possess the correct sign and statistically significant level with the speed of adjustment back to equilibrium at 14%. No short-run causal relationship is observed between energy consumption on the one hand and economic growth, industry growth and urban growth. Only foreign direct investment as a control variable has a bidirectional short-run causal relationship with energy consumption.

Relation of technology and urbanization with electricity consumption in Kazakhstan

“…Based on the study, we can forecast an increase in electricity consumption as a result of urbanization growth (increase in per capita consumption up to 6800 kWh), which is confirmed by previous studies (Ayinde, et al, 2019;Su, 2020;Nazarov et al, 2018). However, investments and other consistent support of the digital technology and renewable energy industries can reduce energy consumption and optimize peak loads in networks in cities (confirms the conclusions of Takase and Murota, 2004), which requires the development of blockchain technologies that actively use small energy companies: LO3 Energy in the USA, Power Ledger in Australia, Verv and Piclo in the UK, EnerPort in Ireland (EnergyNet, 2018).…”

“…However, it was noted in Nigeria that there were no short-term causal links between energy consumption, economic growth, industrial growth and urban growth. One of the possible reasons for this interrelation is that energy consumption has been at a very low level for many years and therefore there is a low correlation between economic growth, urbanization and industrialization (Ayinde et al, 2019). Wang et al (2015) noted that in China, urban population consume about three times as much ener gy as rural population and rapid urbanization has led to huge energy demand.…”

Factors Contributing CO<sub>2</sub> Emissions: A Linear, Nonlinear, and Panel ARDL Model

“…The causal associations between energy use and economic variables are examined since the 1970s with the leading accomplishments of Kraft and Kraft [48] in the USA, but the pragmatic results are indecisive [10]. At present, there is a comprehensive research on CO 2 emissions and its determining factors.…”

The Effect of the Covid-19 Pandemic on Stock Prices With the Event Window Approach: A Case Study of State Gas Companies, in the Energy Sector

“…However, supposing the daily volatility of energy is high, there tends to be either an enormous increase or decrease in stock price, thereby leading to the provision of trade benefits, which is referred to as "High-Risk High-Returns" (Hull, 2015;Zali et al, 2018;Lyócsa et al, 2020, (Ayinde et al, 2019. Investors that usually adopt strategic trading plans prefer high volatility (risk taker).…”