Electricity consumption and its determinants in Nigeria

• Main Authors: Idowu Daniel Onisanwa, Mercy Ojochegbe Adaji
• Format: Article
• Language: English
• Published: Publishing House of the University of Economics in Katowice 2020-09-01
• Series: Journal of Economics and Management
• Subjects: electricity consumption; electricity shortages; per capita income; nigeria
• Online Access: https://www.ue.katowice.pl/fileadmin/user_upload/wydawnictwo/JEM_Artyku%C5%82y_31_60/JEM_41/05.pdf

Aim/purpose – Low and fluctuating income coupled with epileptic supply of electricity and rising demand for electricity make determinants of electricity consumption an important issue in developing economies such as Nigeria; given that electricity is essential for the development of any economy. This paper, therefore, examines the determinants of electricity consumption in Nigeria with emphasis on income per capita, number of electricity customers, and electricity distribution shortages. Design/methodology/approach – The study is anchored on the Utility Maximising Behaviour of consumers given their level of income. Data were sourced from the Energy Information Administration (EIA) database and World Development Indicator, 2018. An Autoregressive Distributed Lag (ARDL) technique was used in estimating the factors influencing electricity consumption in Nigeria over the period between 1981 and 2017. Findings – The result reveals that the major propellers of electricity consumption in the long-run in Nigeria are per capita income, population per square kilometre, number of electricity customers as well as electricity shortages. The result refutes the hypothesis that electricity consumption increases with the rising level of income. Electricity consumption increased with the increasing number of population in a given area and the number of electricity customers, while electricity shortages distribution has a differential effect in the short run and long run. Research implications/limitations – Lack of reliable household level data capturing per unit price of electricity, and other determinants of electricity consumption in Nigeria implies the analysis is to be carried out on the macro level. A micro-level analysis will be more beneficial in arriving at clearer estimates of demand for electricity in Nigeria. Similarly, there are other factors that influence demand for electricity in Nigeria which are not readily available, hence the need to interpret the result with caveat. Originality/value/contribution – The research focused on the determinants of electricity consumption instead of energy that has been extensively researched. It contributed to the existing literature on the determinants of electricity consumption in Nigeria by including electricity distribution shortages, number of electricity customers, and population per square kilometre.