ELECTRICITY CONSUMPTION AND ECONOMIC GROWTH IN NIGERIA: NEW INSIGHTS INTO THE CAUSALITY RELATIONSHIP

AN ECONOMETRICS ASSIGNMENT SUBMITTED BY
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OLUWAFEMI JOSHUA IBRAHIM
MATRIC NUMBER: 121937
LEVEL: 700

LECTURER IN-CHARGE: PROFESSOR E.O. OGUNKOLA

November, 2010

1) STATEMENT OF THE PROBLEM Electricity plays a very important role in the socio-economic and technological development of every nation. It is widely accepted that there is a strong correlation between socio-economic development and the availability of electricity (Sambo, 2008). It is generally recognized that energy, including electricity, plays a significant role in economic development, not only because it enhances the productivity of capital , labour and other factors of production, but also that increased consumption, particularly commercial energy like electricity, signifies high economic status of a country(Aklas & Yilmaz, 2008). The relationship that exists between electricity consumption and economic growth has been of great interest to many researchers. The study of this relationship arises from the need to understand the complex links between these variables. Such understanding is basic to regulators and investors in deregulated electricity markets, in order to design a system that is reliable, efficient and growth-efficient. The empirical argument has been centered on whether economic growth responds to increase in electricity consumption, or whether increase in economic growth propels increase in electricity consumption. To this end, various empirical studies have explored the causal and long-run relationship that exists between electricity consumption and economic growth. So far, there have been different and conflicting empirical findings as regards this relationship in different economies. The empirical outcomes of the past studies