Industrial development, electricity crisis and economic performance in Nigeria
European Journal of Economics, Finance and Administrative Sciences
Department of Economics, University of Calabar-Nigeria, Nigeria
This paper seeks to investigate the causal and long-run relationship between electricity supply, industrialization and economic development in Nigeria from 1970-2008. To achieve this, the paper employed the Granger Causality test and the ARDL bounds test approach to cointegration proposed by Pesaran et al (2001). In order to determine the time series characteristics of variables used in the regression, the paper adopted the approach of NG and Perron (2001) modified unit root test. The Granger Causality results showed that there is a feedback causal relationship between GDP per capita and electricity supply. Unidirectional relationship is seen between capital employed and GDP per capita without a feedback effect, running from capital to GDP per capita. The same unidirectional relationship is observed between electricity supply and capital; the causality runs from capital to electricity supply. The causality result also revealed a unidirectional relationship without feedback effect between labour and electricity supply. The Granger causality test found no causal link in the case of industrial output and GDP per capita. The results of the long run and error correction model showed that industrial development, electricity supply, technology and capital employed are important determinants of economic development. Stability tests were also conducted using CUSUM and CUSUMQ and the Jarque-Bera normality test. The results strongly suggest that the residuals are within the boundaries. This implies that the parameters of the model remained within its critical bounds of parameter stability throughout the period of study. The paper concludes that for Nigeria to drive economic development through industrialization, the country should fix the electricity supply problem. © EuroJournals, Inc.