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The role of electricity consumption, capital, labor force, carbon emissions on economic growth: implication for environmental sustainability targets in Nigeria

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Abstract

Despite consistent investments, grants, and other concessions in the power sector, nationwide power outages still remain an issue, even in 2020, disrupting business operations, contributing to huge recurrent expenses on generators and alternative sources of electricity in homes, businesses, and institutions. In this paper, we examine the role of electricity consumption on economic growth, while controlling for labor, capital, and carbon emissions, using the autoregressive distributed lag (ARDL) and the novel dynamic ARDL (DYNARDL) simulation analysis over the periods 1981–2019. Empirical results show that electricity consumption, capital, and labor exert positive inelastic impacts, while carbon emissions exert negative inelastic significant impact on economic growth within the period under investigation. From policy standpoint, we are of the opinion that stable supply and consumption of electricity can possibly boost economic growth and engender social stability in Nigeria. Thus, there is a need to strengthen the effectiveness of power sector and its energy generating agencies by ensuring periodic replacement of worn-out equipment in terms of adequately financed and efficient labor in order to enhance the contribution of the sector on economic growth, while in terms of environmental degradation, policy makers should work towards promotion of green economy for a sustainable economic growth and environment in Nigeria.

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Availability of data and materials

We sourced all data from World Bank Development Database.

Notes

  1. Pesaran, Shin, and Smith (1998) provide critical values to test the hypothesis, with and without time trend. The critical values are grouped into “upper” and “lower” bounds, where the upper bound assumes that all the variables are jointly first-difference stationary, i.e., I(1) and the lower bound assumes that all the variables are level stationary or I(0). To reject the null hypothesis, the calculated F-statistic must be above the upper bound critical value. If the calculated F-statistic is found to be below the lower bound, a decision to fail to reject the null hypothesis is required for the model. As a final point, if the calculated F-statistic lies in between the upper and the lower bound, the test result is inconclusive. At this stage, knowledge of the order of integration (or time series properties of the variables) is required to proceed.

  2. The lag length and lag criterion are chosen; the criterion could be any of Schwartz, Hannan Quinn, or the Akaike. Stability and diagnostic checks are carried out for heteroscedasticity, serial correlation, functional form misspecification, and normality of the data.

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Authors and Affiliations

  1. Monetary Policy Department, Central Bank of Nigeria, Abuja, Nigeria

    Martins Olugbenga Apinran, Nuruddeen Usman & Chinwendu Ifunanya Onuzo

  2. Research Department, Central Bank of Nigeria, Abuja, Nigeria

    Seyi Saint Akadiri

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  1. Martins Olugbenga Apinran
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  2. Nuruddeen Usman
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  3. Seyi Saint Akadiri
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  4. Chinwendu Ifunanya Onuzo
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Contributions

Martins O. Apinran is responsible for the study development.

Nurudden Usman sourced for data, methodology, and estimations.

Seyi Saint Akadiri is responsible for the empirical discussion.

Chinwendu Ifunanya, Onuzo is responsible for manuscript development and proofreading.

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Correspondence to Seyi Saint Akadiri.

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Apinran, M.O., Usman, N., Akadiri, S.S. et al. The role of electricity consumption, capital, labor force, carbon emissions on economic growth: implication for environmental sustainability targets in Nigeria. Environ Sci Pollut Res 29, 15955–15965 (2022). https://doi.org/10.1007/s11356-021-16584-6

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