Electricity Consumption and Capacity Utilization in Nigeria

Abstract

The study investigated the effects of electricity consumption on capacity utilization in Nigeria from 1981 to 2017. The study made use of annual time series data which were sourced from Central Bank of Nigeria (CBN) Statistical Bulletin (2018) and World Development Indicators (WDI). Unit root test of Augmented Dickey-fuller (ADF) and Philip Perron (PP) were used for preliminary test with Johansen co-integration test. The study employed Normalized co-integration and vector error correction mechanism in analyzing the data. The unit root results indicated that all variables were stationary at differenced of order I(1), while co-integration established a long run relationship among the variables. The normalized co-integration finding revealed that lnelec, lncabem and lnelecge have positive impact on the lncpu while lncrind and lnecp have negative impact on lncpu, on average. The coefficients of lnelec, lnecp and lnelecge were statistically significant at 5% and 1% levels of significance. Vector error correction mechanism technique showed that a unit rises in inelec, incabem and inelecge decreases incpu by 0.96 percent, 0.20 percent and 0.55 percent respectively on average in the long run while a percentage change in inelec, incabem and inelecge decreases lncpu by 0.186, 0.020 and 0.125 percent respectively on average, ceteris paribus in the short run. Therefore, the study recommended policies aimed at providing reliable and stable power supply thereby creating avenue for maximum capacity utilization in Nigeria industries.Keywords: Electricity consumption, Capacity utilization, Electricity generatedJEL Classifications: L94, O14, Q41DOI: https://doi.org/10.32479/ijeep.10580