AN EMPIRICAL INVESTIGATION OF THE CAUSAL RELATIONSHIP BETWEEN ENERGY CONSUMPTION AND ECONOMIC GROWTH IN NIGERIA (1975 – 2004)

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AN EMPIRICAL INVESTIGATION OF THE CAUSAL RELATIONSHIP BETWEEN ENERGY CONSUMPTION AND ECONOMIC GROWTH IN NIGERIA (1975 – 2004)

ABSTRACT

This thesis investigated the causal relationship between energy consumption and economic growth in Nigeria (1975-2004). This study was inspired from the series of contradictions obtained in the literatures as regards the possibility of energy consumption and economic growth to have a relationship. This thesis investigated whether it is energy consumption that causes growth or economic growth that causes energy consumption in Nigeria. The methodology adopted for the study was the use of Granger causality test statistics to test for the causal relationship between economic growth and energy consumption in Nigeria. Sequel to that, a trend analysis was carried out. The trend parameter (R2) was used to determine the magnitude of energy consumption and the trend strength of the energy consumption variable within the study period. Based on the results of the findings, the Granger statistical f value obtained was 10.2 which are greater than the f critical value of 4.2 at lag 2. This result was significant at 5 percent probability level. This result rejected the null hypothesis and accepted the alternate hypothesis that Economic growth Granger causes energy consumption in Nigeria. 9 This one-way causality may be explained by the nature of the production structure of Nigeria which is dominated by services and agricultural activities that are less energy intensive. Sequel to this, the level of industrialization that demands more energy resources is still very low and as such energy consumption at this stage may not be able to make any significant impact to the growth of the Nigeria economy. The result of the trend analysis showed that there was a strong positive upward movement in the consumption of the different energy types in Nigeria except for coal that showed a downward trend. The trend parameter R2 for energy consumption in the pre-SAP period was 67 percent while it was 70 percent for the post-SAP period. The study therefore recommended that all efforts must be geared towards the attainment of the overall growth of the economy. Investment opportunity must be enhanced on a level playing ground, the private sector particularly the banking sector should be encouraged to invest into the real sector of the economy rather than just commercial activities. This will go a long way in repositioning the Nigerian economy while boosting energy consumption and production in the country. This is with the view of attaining sustainable development.

AN EMPIRICAL INVESTIGATION OF THE CAUSAL RELATIONSHIP BETWEEN ENERGY CONSUMPTION AND ECONOMIC GROWTH IN NIGERIA (1975 – 2004)

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