Energy consumption, prices and economic growth in Nigeria: Autoregressive distributed lag model analysis

https://doi.org/10.35912/amor.v6i4.2191
Published: May 22, 2025

Abstract:

Purpose: This study aimed to test the relationship between energy consumption, energy prices, and economic growth in Nigeria by examining the coefficients of various variables in a regression analysis.

Research Methodology: This study uses regression analysis to assess the relationship between energy-related variables and economic growth in Nigeria, focusing on factors such as gas consumption, crude oil prices, fuel prices, and coal consumption.

Results: The results indicate that certain energy-related variables, such as gas consumption, crude oil prices, and coal consumption, have significant impacts on economic growth in Nigeria. The coefficients of these variables show both positive and negative relationships with GDP growth rates.

Conclusions: Energy consumption is a key driver of Nigeria’s economic growth, with short-run demand driven by GDP and long-run growth sustained by increased energy use, highlighting the critical need for stable energy policies and infrastructure development.

Limitations: One limitation of this study is the potential for omitted variable bias or unobserved factors that could influence the results.

Contribution: This study contributes to the understanding of how energy consumption and fuel prices affect economic growth in Nigeria, providing insights for policymakers, researchers, and stakeholders in the energy sector.

Novelty: The novelty of this study lies in its detailed analysis of the specific effects of energy-related variables on economic growth in Nigeria, highlighting the importance of energy policies and consumption patterns in driving economic performance. This study also contributes to the literature on how energy costs affect Nigeria's energy use and economic growth.

Keywords:
1. Autoregressive Distributed Lag Model
2. Economic growth
3. Energy consumption
4. Energy Prices
5. Nigeria
Authors:
1 . John Sylvester Afaha
Caleb University, Lagos, Nigeria, Nigeria
2 . Samsindeen Ayodele Agbede
Caleb University, Lagos, Nigeria, Nigeria
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How to Cite
Afaha, J. S., & Agbede, S. A. (2025). Energy consumption, prices and economic growth in Nigeria: Autoregressive distributed lag model analysis. Annals of Management and Organization Research, 6(4), 385–404. https://doi.org/10.35912/amor.v6i4.2191
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Vol. 6 No. 4 (2025): May
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References

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    Akinlo, A. E. (2018). Energy consumption and economic growth: Evidence from 11 Sub-Sahara African countries. Energy Economics, 30(5), 2391-2400. https://doi.org/10.1016/j.eneco.2008.01.008

    Ambapour, S., & Massamba, C. (2015). Economic growth and energy consumption in Congo: an analysis in terms of causality. Retrieved from

    Anochiwa, L., Enyoghasim, M. O., Uma, K. E., Obidike, C. P., Uwazie, I. U., Ogbonnaya, I. O., . . . Anyanwu, C. K. (2020). Energy consumption and economic growth Nexus in Nigeria: Evidence based on ARDL bound test approach. International journal of energy economics and policy, 10(6), 713-721. https://doi.org/10.32479/ijeep.10021

    Asafu-Adjaye, J. (2020). The relationship between energy consumption, energy prices and economic growth: time series evidence from Asian developing countries. Energy Economics, 22(6), 615-625. https://doi.org/10.1016/S0140-9883(00)00050-5

    Balcilar, M., Van Eyden, R., Uwilingiye, J., & Gupta, R. (2017). The impact of oil price on South African GDP growth: A Bayesian Markov switching?VAR analysis. African Development Review, 29(2), 319-336. https://doi.org/10.1111/1467-8268.12259

    Birol, F. (2007). World energy prospects and challenges. Asia-Pacific Review, 14(1), 1-12. https://doi.org/10.1080/13439000701330528

    Blanchard, O. J., & Gali, J. (2017). The Macroeconomic Effects of Oil Shocks: Why are the 2000s so different from the 1970s? : National bureau of economic research Cambridge, Mass., USA. https://doi.org/ 10.3386/w13368

    Burbidge, J., & Harrison, A. (2018). Testing for the effects of oil-price rises using vector autoregressions. International economic review, 459-484. https://doi.org/10.2307/2526209

    Chen, W.-B., Liu, W.-C., & Hsu, M.-H. (2023). Modeling assessment of tidal current energy at Kinmen Island, Taiwan. Renewable Energy, 50, 1073-1082. https://doi.org/10.1016/j.renene.2012.08.080

    Ekeocha, P. C., Penzin, D. J., & Ogbuabor, J. E. (2020). Energy consumption and economic growth in nigeria: A test of alternative specifications. International journal of energy economics and policy, 10(3), 369-379. https://doi.org/10.32479/ijeep.8902

    Engle, R., & Granger, C. (1991). Long-run economic relationships: Readings in cointegration: Oxford University Press.

    Engle, R. F., & Granger, C. W. (1987). Co-integration and error correction: representation, estimation, and testing. Econometrica: journal of the Econometric Society, 251-276. https://doi.org/10.2307/1913236

    Fatai, K., Oxley, L., & Scrimgeour, F. G. (2024). Modelling the causal relationship between energy consumption and GDP in New Zealand, Australia, India, Indonesia, The Philippines and Thailand. Mathematics and computers in simulation, 64(3-4), 431-445. https://doi.org/10.1016/S0378-4754(03)00109-5

    Filis, G., Degiannakis, S., & Floros, C. (2021). Dynamic correlation between stock market and oil prices: The case of oil-importing and oil-exporting countries. International review of financial analysis, 20(3), 152-164. https://doi.org/10.1016/j.irfa.2011.02.014

    Frimpong, P. B., Antwi, A. O., & Brew, S. E. Y. (2018). Effect of energy prices on economic growth in the ECOWAS sub-region: Investigating the channels using panel data. Journal of African Business, 19(2), 227-243. https://doi.org/10.1080/15228916.2017.1405706

    Gisser, M., & Goodwin, T. H. (2018). Crude oil and the macroeconomy: Tests of some popular notions: Note. Journal of Money, Credit and Banking, 18(1), 95-103. https://doi.org/10.2307/1992323

    Glasure, Y. U., & Lee, A.-R. (1998). Cointegration, error-correction, and the relationship between GDP and energy:: The case of South Korea and Singapore. Resource and Energy Economics, 20(1), 17-25. https://doi.org/10.1016/S0928-7655(96)00016-4

    Gonese, D., Hompashe, D., & Sibanda, K. (2019). The impact of electricity prices on sectoral output in South Africa from 1994 to 2015. African Journal of Economic and Management Studies, 10(2), 198-211. https://doi.org/10.1108/AJEMS-12-2017-0305

    Hamilton, E. M. (2021). Green building, green behavior? An analysis of building characteristics that support environmentally responsible behaviors. Environment and Behavior, 53(4), 409-450. https://doi.org/10.1177/0013916520942601

    Hamilton, J. D. (1983). Oil and the macroeconomy since World War II. Journal of political economy, 91(2), 228-248.

    Hou, Q. (2019). The relationship between energy consumption growths and economic growth in China. International journal of economics and finance, 1(2), 232-237. https://doi.org/10.5539/ijef.v1n2p232

    Huntington, H., & Liddle, B. (2022). How energy prices shape OECD economic growth: Panel evidence from multiple decades. Energy Economics, 111, 106082. https://doi.org/10.1016/j.eneco.2022.106082

    Inglesi-Lotz, R., & Pouris, A. (2016). On the causality and determinants of energy and electricity demand in South Africa: A review. Energy Sources, Part B: Economics, Planning, and Policy, 11(7), 626-636. https://doi.org/10.1080/15567249.2013.801536

    Jiménez-Rodríguez*, R., & Sánchez, M. (2015). Oil price shocks and real GDP growth: empirical evidence for some OECD countries. Applied economics, 37(2), 201-228. https://doi.org/10.1080/0003684042000281561

    Jumbe, C. B. (2024). Cointegration and causality between electricity consumption and GDP: empirical evidence from Malawi. Energy Economics, 26(1), 61-68. https://doi.org/10.1016/S0140-9883(03)00058-6

    Keppler, J. H. (2017). Causality and cointegration between energy consumption and economic growth in developing countries The Econometrics of Energy Systems (pp. 75-97): Springer.

    Khobai, H., Mugano, G., & Le Roux, P. (2017). The impact of electricity price on economic growth in South Africa. International journal of energy economics and policy, 7(1), 108-116.

    Kumar, V., Shrivastava, R., & Untawale, S. (2015). Solar energy: review of potential green & clean energy for coastal and offshore applications. Aquatic Procedia, 4, 473-480. https://doi.org/10.1016/j.aqpro.2015.02.062

    Lardic, S., & Mignon, V. (2016). The impact of oil prices on GDP in European countries: An empirical investigation based on asymmetric cointegration. Energy policy, 34(18), 3910-3915. https://doi.org/10.1016/j.enpol.2005.09.019

    Lee, C.-C., & Chang, C.-P. (2015). Structural breaks, energy consumption, and economic growth revisited: evidence from Taiwan. Energy Economics, 27(6), 857-872. https://doi.org/10.1016/j.eneco.2005.08.003

    Legoete, L. (2005). An evaluation, investigation and recording of the design and implementation of the cost-based tariff design training programme to align Eskom distribution for EDI restructuring. Citeseer.

    Mazambani, F. R. (2015). The impact of electricity prices on economic growth: A case study of South Africa. University of Fort Hare.

    Mork, K. A. (1989). Oil and the macroeconomy when prices go up and down: an extension of Hamilton's results. Journal of political economy, 97(3), 740-744.

    Mork, K. A., Olsen, y., & Mysen, H. T. (1994). Macroeconomic responses to oil price increases and decreases in seven OECD countries. The Energy Journal, 15(4), 19-35. https://doi.org/10.5547/ISSN0195-6574-EJ-Vol15-No4-2

    Narayan, P. K. (2015). The saving and investment nexus for China: evidence from cointegration tests. Applied economics, 37(17), 1979-1990. https://doi.org/10.1080/00036840500278103

    Okorie, U. E., Osabuohien, E., & Oaikhenan, H. E. (2020). Electricity consumption, public agricultural expenditure and output in Nigeria: A time series dynamic approach. International journal of energy economics and policy, 10(2), 113-123. https://doi.org/10.32479/ijeep.8436

    Osigwe, A. C., & Arawomo, D. F. (2015). Energy consumption, energy prices and economic growth: Causal relationships based on error correction model. International journal of energy economics and policy, 5(2), 408-412.

    Ozturk, I., & Acaravci, A. (2020). The causal relationship between energy consumption and GDP in Albania, Bulgaria, Hungary and Romania: Evidence from ARDL bound testing approach. Applied Energy, 87(6), 1938-1943. https://doi.org/10.1016/j.apenergy.2009.10.010

    Papapetrou, E. (2021). Oil price shocks, stock market, economic activity and employment in Greece. Energy Economics, 23(5), 511-532. https://doi.org/10.1016/S0140-9883(01)00078-0

    Paul, S., & Bhattacharya, R. N. (2024). CO2 emission from energy use in India: a decomposition analysis. Energy policy, 32(5), 585-593. https://doi.org/10.1016/S0301-4215(02)00311-7

    Payne, J. E. (2020). Survey of the international evidence on the causal relationship between energy consumption and growth. Journal of Economic Studies, 37(1), 53-95. https://doi.org/10.1108/01443581011012261

    Prince, A. I., Inim, I. O., Callistus, E. O., & Udo, E. S. (2021). Energy consumption effect on economic growth in Nigeria: Multivariate framework. International Journal of Economics, Management and Accounting, 519-542. https://doi.org/10.31436/ijema.v29i2.932

    Rheynaldi, P. K., Endri, E., Minanari, M., Ferranti, P. A., & Karyatun, S. (2023). Energy price and stock return: Evidence of energy sector companies in Indonesia. International Journal of Energy Economics and Policy, 13(5), 31-36. https://doi.org/10.32479/ijeep.14544

    Sitompul, R. F., Endri, E., Hasibuan, S., Jaqin, C., Indrasari, A., & Putriyana, L. (2022). Policy challenges of Indonesia's local content requirements on power generation and turbine production capability. International Journal of Energy Economics and Policy, 12(1), 225-235. https://doi.org/10.32479/ijeep.12504

    Sodeyfi, S., & Katircioglu, S. (2016). Interactions between business conditions, economic growth and crude oil prices. Economic Research-Ekonomska Istraživanja, 29(1), 980-990. http://dx.doi.org/10.1080/1331677X.2016.1235504

    Stern, D. I. (2019). Energy and economic growth Routledge handbook of Energy economics (pp. 28-46): Routledge.

    Tang, C. F., Tan, B. W., & Ozturk, I. (2016). Energy consumption and economic growth in Vietnam. Renewable and Sustainable Energy Reviews, 54, 1506-1514. https://doi.org/10.1016/j.rser.2015.10.083

    Weliswa, M. (2013). The impact of oil price volatility on economic growth in South Africa: A cointegration approach. UNIVERSITY OF FORT HARE SOUTH AFRICA.

    Worldbank. (2021). World Development Indicators.

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  2. Akinlo, A. E. (2018). Energy consumption and economic growth: Evidence from 11 Sub-Sahara African countries. Energy Economics, 30(5), 2391-2400. https://doi.org/10.1016/j.eneco.2008.01.008
  3. Ambapour, S., & Massamba, C. (2015). Economic growth and energy consumption in Congo: an analysis in terms of causality. Retrieved from
  4. Anochiwa, L., Enyoghasim, M. O., Uma, K. E., Obidike, C. P., Uwazie, I. U., Ogbonnaya, I. O., . . . Anyanwu, C. K. (2020). Energy consumption and economic growth Nexus in Nigeria: Evidence based on ARDL bound test approach. International journal of energy economics and policy, 10(6), 713-721. https://doi.org/10.32479/ijeep.10021
  5. Asafu-Adjaye, J. (2020). The relationship between energy consumption, energy prices and economic growth: time series evidence from Asian developing countries. Energy Economics, 22(6), 615-625. https://doi.org/10.1016/S0140-9883(00)00050-5
  6. Balcilar, M., Van Eyden, R., Uwilingiye, J., & Gupta, R. (2017). The impact of oil price on South African GDP growth: A Bayesian Markov switching?VAR analysis. African Development Review, 29(2), 319-336. https://doi.org/10.1111/1467-8268.12259
  7. Birol, F. (2007). World energy prospects and challenges. Asia-Pacific Review, 14(1), 1-12. https://doi.org/10.1080/13439000701330528
  8. Blanchard, O. J., & Gali, J. (2017). The Macroeconomic Effects of Oil Shocks: Why are the 2000s so different from the 1970s? : National bureau of economic research Cambridge, Mass., USA. https://doi.org/ 10.3386/w13368
  9. Burbidge, J., & Harrison, A. (2018). Testing for the effects of oil-price rises using vector autoregressions. International economic review, 459-484. https://doi.org/10.2307/2526209
  10. Chen, W.-B., Liu, W.-C., & Hsu, M.-H. (2023). Modeling assessment of tidal current energy at Kinmen Island, Taiwan. Renewable Energy, 50, 1073-1082. https://doi.org/10.1016/j.renene.2012.08.080
  11. Ekeocha, P. C., Penzin, D. J., & Ogbuabor, J. E. (2020). Energy consumption and economic growth in nigeria: A test of alternative specifications. International journal of energy economics and policy, 10(3), 369-379. https://doi.org/10.32479/ijeep.8902
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  13. Engle, R. F., & Granger, C. W. (1987). Co-integration and error correction: representation, estimation, and testing. Econometrica: journal of the Econometric Society, 251-276. https://doi.org/10.2307/1913236
  14. Fatai, K., Oxley, L., & Scrimgeour, F. G. (2024). Modelling the causal relationship between energy consumption and GDP in New Zealand, Australia, India, Indonesia, The Philippines and Thailand. Mathematics and computers in simulation, 64(3-4), 431-445. https://doi.org/10.1016/S0378-4754(03)00109-5
  15. Filis, G., Degiannakis, S., & Floros, C. (2021). Dynamic correlation between stock market and oil prices: The case of oil-importing and oil-exporting countries. International review of financial analysis, 20(3), 152-164. https://doi.org/10.1016/j.irfa.2011.02.014
  16. Frimpong, P. B., Antwi, A. O., & Brew, S. E. Y. (2018). Effect of energy prices on economic growth in the ECOWAS sub-region: Investigating the channels using panel data. Journal of African Business, 19(2), 227-243. https://doi.org/10.1080/15228916.2017.1405706
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  18. Glasure, Y. U., & Lee, A.-R. (1998). Cointegration, error-correction, and the relationship between GDP and energy:: The case of South Korea and Singapore. Resource and Energy Economics, 20(1), 17-25. https://doi.org/10.1016/S0928-7655(96)00016-4
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  20. Hamilton, E. M. (2021). Green building, green behavior? An analysis of building characteristics that support environmentally responsible behaviors. Environment and Behavior, 53(4), 409-450. https://doi.org/10.1177/0013916520942601
  21. Hamilton, J. D. (1983). Oil and the macroeconomy since World War II. Journal of political economy, 91(2), 228-248.
  22. Hou, Q. (2019). The relationship between energy consumption growths and economic growth in China. International journal of economics and finance, 1(2), 232-237. https://doi.org/10.5539/ijef.v1n2p232
  23. Huntington, H., & Liddle, B. (2022). How energy prices shape OECD economic growth: Panel evidence from multiple decades. Energy Economics, 111, 106082. https://doi.org/10.1016/j.eneco.2022.106082
  24. Inglesi-Lotz, R., & Pouris, A. (2016). On the causality and determinants of energy and electricity demand in South Africa: A review. Energy Sources, Part B: Economics, Planning, and Policy, 11(7), 626-636. https://doi.org/10.1080/15567249.2013.801536
  25. Jiménez-Rodríguez*, R., & Sánchez, M. (2015). Oil price shocks and real GDP growth: empirical evidence for some OECD countries. Applied economics, 37(2), 201-228. https://doi.org/10.1080/0003684042000281561
  26. Jumbe, C. B. (2024). Cointegration and causality between electricity consumption and GDP: empirical evidence from Malawi. Energy Economics, 26(1), 61-68. https://doi.org/10.1016/S0140-9883(03)00058-6
  27. Keppler, J. H. (2017). Causality and cointegration between energy consumption and economic growth in developing countries The Econometrics of Energy Systems (pp. 75-97): Springer.
  28. Khobai, H., Mugano, G., & Le Roux, P. (2017). The impact of electricity price on economic growth in South Africa. International journal of energy economics and policy, 7(1), 108-116.
  29. Kumar, V., Shrivastava, R., & Untawale, S. (2015). Solar energy: review of potential green & clean energy for coastal and offshore applications. Aquatic Procedia, 4, 473-480. https://doi.org/10.1016/j.aqpro.2015.02.062
  30. Lardic, S., & Mignon, V. (2016). The impact of oil prices on GDP in European countries: An empirical investigation based on asymmetric cointegration. Energy policy, 34(18), 3910-3915. https://doi.org/10.1016/j.enpol.2005.09.019
  31. Lee, C.-C., & Chang, C.-P. (2015). Structural breaks, energy consumption, and economic growth revisited: evidence from Taiwan. Energy Economics, 27(6), 857-872. https://doi.org/10.1016/j.eneco.2005.08.003
  32. Legoete, L. (2005). An evaluation, investigation and recording of the design and implementation of the cost-based tariff design training programme to align Eskom distribution for EDI restructuring. Citeseer.
  33. Mazambani, F. R. (2015). The impact of electricity prices on economic growth: A case study of South Africa. University of Fort Hare.
  34. Mork, K. A. (1989). Oil and the macroeconomy when prices go up and down: an extension of Hamilton's results. Journal of political economy, 97(3), 740-744.
  35. Mork, K. A., Olsen, y., & Mysen, H. T. (1994). Macroeconomic responses to oil price increases and decreases in seven OECD countries. The Energy Journal, 15(4), 19-35. https://doi.org/10.5547/ISSN0195-6574-EJ-Vol15-No4-2
  36. Narayan, P. K. (2015). The saving and investment nexus for China: evidence from cointegration tests. Applied economics, 37(17), 1979-1990. https://doi.org/10.1080/00036840500278103
  37. Okorie, U. E., Osabuohien, E., & Oaikhenan, H. E. (2020). Electricity consumption, public agricultural expenditure and output in Nigeria: A time series dynamic approach. International journal of energy economics and policy, 10(2), 113-123. https://doi.org/10.32479/ijeep.8436
  38. Osigwe, A. C., & Arawomo, D. F. (2015). Energy consumption, energy prices and economic growth: Causal relationships based on error correction model. International journal of energy economics and policy, 5(2), 408-412.
  39. Ozturk, I., & Acaravci, A. (2020). The causal relationship between energy consumption and GDP in Albania, Bulgaria, Hungary and Romania: Evidence from ARDL bound testing approach. Applied Energy, 87(6), 1938-1943. https://doi.org/10.1016/j.apenergy.2009.10.010
  40. Papapetrou, E. (2021). Oil price shocks, stock market, economic activity and employment in Greece. Energy Economics, 23(5), 511-532. https://doi.org/10.1016/S0140-9883(01)00078-0
  41. Paul, S., & Bhattacharya, R. N. (2024). CO2 emission from energy use in India: a decomposition analysis. Energy policy, 32(5), 585-593. https://doi.org/10.1016/S0301-4215(02)00311-7
  42. Payne, J. E. (2020). Survey of the international evidence on the causal relationship between energy consumption and growth. Journal of Economic Studies, 37(1), 53-95. https://doi.org/10.1108/01443581011012261
  43. Prince, A. I., Inim, I. O., Callistus, E. O., & Udo, E. S. (2021). Energy consumption effect on economic growth in Nigeria: Multivariate framework. International Journal of Economics, Management and Accounting, 519-542. https://doi.org/10.31436/ijema.v29i2.932
  44. Rheynaldi, P. K., Endri, E., Minanari, M., Ferranti, P. A., & Karyatun, S. (2023). Energy price and stock return: Evidence of energy sector companies in Indonesia. International Journal of Energy Economics and Policy, 13(5), 31-36. https://doi.org/10.32479/ijeep.14544
  45. Sitompul, R. F., Endri, E., Hasibuan, S., Jaqin, C., Indrasari, A., & Putriyana, L. (2022). Policy challenges of Indonesia's local content requirements on power generation and turbine production capability. International Journal of Energy Economics and Policy, 12(1), 225-235. https://doi.org/10.32479/ijeep.12504
  46. Sodeyfi, S., & Katircioglu, S. (2016). Interactions between business conditions, economic growth and crude oil prices. Economic Research-Ekonomska Istraživanja, 29(1), 980-990. http://dx.doi.org/10.1080/1331677X.2016.1235504
  47. Stern, D. I. (2019). Energy and economic growth Routledge handbook of Energy economics (pp. 28-46): Routledge.
  48. Tang, C. F., Tan, B. W., & Ozturk, I. (2016). Energy consumption and economic growth in Vietnam. Renewable and Sustainable Energy Reviews, 54, 1506-1514. https://doi.org/10.1016/j.rser.2015.10.083
  49. Weliswa, M. (2013). The impact of oil price volatility on economic growth in South Africa: A cointegration approach. UNIVERSITY OF FORT HARE SOUTH AFRICA.
  50. Worldbank. (2021). World Development Indicators.
  51. Yu, E. S., & Choi, J.-Y. (1985). The causal relationship between energy and GNP: an international comparison. The Journal of Energy and Development, 10(2), 249-272.