Electricity Consumption and Industrial Performance in Nigeria

Abstract

Over the years, demand for electricity has continued to grow while supply has consistently declined. The shortages of electricity supply formed the major background for energy crisis in Nigeria. The reason for this is that, all efforts are concentrated at generating electricity from only two major sources, namely: hydropower and gas. Therefore, this study investigated the effects of electricity consumption and its implications on industrial performance in Nigeria. Time series data were used for the study, sourced from the Central Bank of Nigeria Annual Report, Statistical Bulletin, Publications of the International Monetary Fund and the National Bureau of Statistics which spanned from 1981 to 2019. The study employed Fully Modified Ordinary Least Squares Method and Descriptive Statistics to carry out the empirical analysis. The findings revealed that a unit rise in industrial electricity consumption and exchange rate contribute to industrial performance by 9.4% and 44% respectively. This indicator only reflects marginal impact of industrial performance in Nigeria compare to other countries. However, a percentage increase in gross fixed capital formation and gross domestic product reduced industrial performance by 0.018% and 0.020%. Meanwhile, capacity utilization signed positive but not statistically significant. The study concluded that irregular electricity supply has weakened industrial performance in Nigeria despite various energy resources available. Therefore, the study recommended well rounded energy mix option through government policies to complement the existing energy sources available in Nigeria, as well, as other renewable energy resources for industrial sector and domestic use.