Electricity consumption and economic growth in Nigeria: Evidence from cointegration and co-feature analysis

The paper investigates the causality relationship between energy consumption and economic growth for Nigeria during the period 1980-2006. The results of our estimation show that real gross domestic product (rGDP) and electricity consumption (ele) are cointegrated and there is only unidirectional Granger causality running from electricity consumption (ele) to (rGDP). Then we applied Hodrick-Prescott (HP) filter to decompose the trend and the fluctuation components of the rGDP and electricity consumption (ele) series. The estimation results show that there is cointegration between the trend and the cyclical components of the two series, which seems to suggest that the Granger causality is possibly related with the business cycle. The paper suggests that investing more and reducing inefficiency in the supply and use of electricity can further stimulate economic growth in Nigeria. The results should, however, be interpreted with caution because of the possibility of loss in power associated with the small sample size and the danger of omitted variable bias that could result from the use of bi-variate analysis.