ELECTRICITY CONSUMPTION AND MANUFACTURING SECTOR PERFORMANCE IN NIGERIA: A VECTOR AUTOREGRESSIVE (VAR) APPROACH
DOI:
https://doi.org/10.31150/ajebm.v3i5.294Keywords:
Electricity consumption per capita, granger causality, impulse response function, manufacturing value addedAbstract
This paper aims at investigating the relationship between electricity consumption and manufacturing sector performance in Nigeria over the period 1981 to 2018. Electricity consumption per capita was used to represent electricity consumption, while manufacturing sector performance was captured by manufacturing value added. The paper utilized Augmented Dickey-Fuller unit root technique, Granger causality test, and the Vector Autoregressive (VAR) approach. The Granger causality test indicated that a unidirectional causality flows between electricity consumption per capita and manufacturing value added. This therefore supports the feedback thesis. Meanwhile, the VAR result indicated that both electricity consumption and manufacturing value added were strongly endogenous. That is, they significantly predict themselves. However, electricity consumption is weakly exogenous in predicting manufacturing value added rather, manufacturing value added is strongly exogenous in predicting electricity consumption in Nigeria. This therefore points to the prevalence of the growth-driven electricity consumption thesis in Nigeria. This thesis is in support of the conservation of electricity. The variance decomposition and impulse response indicated that variations in manufacturing value added responded more to shocks in itself than from shocks electricity consumption. Therefore, the government have a key role to play in ensuring that as the domestic production accelerates and the demand on electricity is rising, adequate provision is made to converse electricity for the future. Alternative energy sources should be developed and utilized so as to free the environment from carbon monoxide emissions associated with running diesel plants during manufacturing activities as a result of epileptic electricity power supply
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