IMPACT OF ELECTRICITY GENERATION ON INDUSTRIAL SECTOR OUTPUT IN NIGERIA
Mande Muhammad , Mustapha Muktar and Jude Ikubor
Volume 11 Issue 1
Abstract
Electricity is a critical driver of industrial productivity, particularly in emerging economies like Nigeria, where the industrial sector plays a pivotal role in economic diversification and development. Despite being Africa's largest economy, Nigeria faces significant energy challenges, with inadequate and unreliable electricity generation severely affecting industrial output. Consequently, this study examined how electricity generation (disaggregated into fossil fuels and hydro) impacts industrial sector performance. The study utilized annual time series data generated from the annual report of the Central Bank of Nigeria Statistical Bulletin, United States Energy Information Administration, World Development Indicators, and KNOEMA from 1981 to 2023. The study employed the Autoregressive Distributed Lag (ARDL) model. The result obtained shows that, in the long run, electricity generation using fossil fuels has a positive and statistically significant relationship with industrial sector output (t = 3.47, P < 0.05). In contrast, hydro has a negative and insignificant relationship with industrial sector output (t = -0.46, P > 0.05). However, the short-run results reported positive but insignificant relationships between fossil fuels (t = 0.35, P > 0.05) and hydroelectricity (t = 0.49, P > 0.05) with industrial output in Nigeria. The findings revealed that despite the abundance of other sources of energy in Nigeria, fossil fuels remain the major source of energy responsible for industrial sector output in Nigeria. The study suggests that to improve the impact of electricity generation on Nigeria's industrial sector output, a comprehensive strategy should focus on expanding the power generation capacity, modernizing the transmission infrastructure, and promoting energy efficiency. Keywords: Electricity Generation, Fossil Fuels, Hydro, Industrial, Output, ARDL
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