Journal de l'économie mondiale

A Bounds Test Analysis of Electricity Consumption and Economic Growth Nexus in Nigeria

Abstract

Oshota SO*

This paper investigated the relationship between electricity consumption and economic growth in Nigeriaduring the period 1970 to 2011, using the Autoregressive Distributed Lag (ARDL) bounds testing procedure to identify the long run equilibrium relationship and VECM Granger causality tests to identify the direction of the causal relationship between these two variables. Our result revealed the existence of long run equilibrium between the variables when Real GDP is treated as the dependent variable and electricity consumption is treated as its long run forcing variable. The VECM Granger causality test results show no evidence of short run causality. However, the results suggest the existence of a long run bidirectional causal relationship between electricity consumption and Real GDP.This implies that over time higher electricity consumption give rise to more economic growth just as economic growth may stimulate increased consumption of electricity in the long run.