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Nexus among electricity consumption, foreign direct investment and aggregate economic activity towards Nigeria’s economic performance: evidence from a trivariate causality model

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Abstract

It is evident that there is nexus among electricity consumption, foreign direct investment and aggregate economic activity. Unfortunately, the causal relationship among the three variables in Nigeria based on modern econometric methods, recent time-series data and ways that sufficiently cater for inflation and population growth has not been adequately investigated. This study, among other things, used a trivariate vector error correction model, autoregressive distributed lag bounds test for cointegration and Granger causality test to analyse the causal relationship among electricity consumption, foreign direct investment and aggregate economic activity based on time-series data from 1970 to 2018. The study found the presence of neutral causality between electricity consumption and aggregate economic activity in the short run as well as unidirectional causality from aggregate economic activity to electricity consumption in the long run. The study also found the presence of unidirectional causality from foreign direct investment to electricity consumption as well as neutral causality between foreign direct investment and aggregate economic activity in both the short run and the long run. It is therefore recommended that steps should be taken to adequately increase foreign direct investment and aggregate economic activity in ways that will guarantee an optimal increase in electricity consumption in Nigeria.

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The data set used and/or analysed during the current study is available from the corresponding author on reasonable request.

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Acknowledgements

We acknowledge the support received from the Africa Centre of Excellence for Sustainable Power and Energy Development (ACESPED), University of Nigeria, Nsukka, Nigeria.

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Authors and Affiliations

  1. Department of Economics, Faculty of the Social Sciences, University of Nigeria, Nsukka, Nigeria

    Uche M. Ozughalu

  2. Department of Electrical Engineering, Faculty of Engineering, University of Nigeria, Nsukka, Nigeria

    Uche C. Ogbuefi

  3. Africa Centre of Excellence for Sustainable Power and Energy Development (ACESPED), University of Nigeria, Nsukka, Nigeria

    Uche C. Ogbuefi

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  1. Uche M. Ozughalu
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Contributions

(a) UMO wrote the sections on introduction, literature review, methods and data sources, results and discussion and part of the section on conclusion and policy implications. (b) UCO wrote the section on electricity generation in Nigeria and part of the section on conclusion and policy implications as well as proofread the entire paper.

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Correspondence to Uche M. Ozughalu.

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Ozughalu, U.M., Ogbuefi, U.C. Nexus among electricity consumption, foreign direct investment and aggregate economic activity towards Nigeria’s economic performance: evidence from a trivariate causality model. Environ Sci Pollut Res 29, 37170–37186 (2022). https://doi.org/10.1007/s11356-021-17840-5

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