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NEXUS BETWEEN ELECTRICITY GENERATION AND SUPPLY ON ECONOMIC

GROWTH IN NIGERIA

BY
1
C.O ARONU; 2C. A. UDECHUKWU; 3C.N OKOLI; AND 4J.O IKEZUE
1,2,3 FACULTY OF PHYSICAL SCIENCES
DEPARTMENT OF STATISTICS
CHUKWUEMEKA ODUMEGWU OJUKWU UNIVERSITY ULI,
ANAMBRA STATE
EMAIL: amaro4baya@yahoo.com
PHONE NO: +2348064065711
&
+2348138979702
udeanthony5@gmail.com
4 FEDERAL SCHOOL OF STATISTICS

BUSINESS ADMINISTRATION DEPARTMENT (BAM)

PHONE NO: +2348037177081


ABSTRACT

The study examine the nexus between electricity Generation and supply on economic growth
in Nigeria. This study was undertaken majorly to examine the impact of power generation on
the economy of Nigeria between 2007-2015. Specific objectives of the study are: To
determine the impact of total energy generated on economic growth in Nigeria and to
ascertain whether total energy supplied has significant impact on economic growth in
Nigeria. Simple linear regression was employed in testing for the existence of the hypothesis.
The findings of the study show that total energy generated have no significant impact on
economic growth in Nigeria. This implies that the total energy generated does not explain the
behaviour or the variation existing on economic growth in Nigeria. Hence the model obtained
was found to be inadequate in explaining economic growth in Nigeria which implies that total
energy generated in Nigeria does not contribute to the economic growth in Nigeria .The
findings of this study also show that total energy sent out has no significant impact on
economic growth in Nigeria. It was found that total energy sent out explains about 24.9% of
total variation on level of economic growth in Nigeria. This implies that total energy sent
out/supplied does not contribute to economic growth in Nigeria. Though the study revealed
an insignificant impact of total energy generated and supply on economic growth in Nigeria,
there is yet serious need for the government to create favourable policy for investors who
may wish to invest in the area of power generation and supply in Nigeria with the sole aim of
boosting the economic growth in Nigeria.
INTRODUCTION

Electricity is pivotal to the economic development of nations. Its use is directly correlated
with healthy economic growth. Nigeria is one of the most populated countries in Africa but
only about 40% of the people are connected to the energy grid. The people who actually have
power experience difficulties around 60% of the time Anaekwe, E. N. (2010). This blackout
that is occasioned by poor power generation has crippled the industrial sector. For example
outages in this area of the world also have implications for the mining industry. When power
fails, workers may be trapped in the mines, so as soon as there is a risk of failure the
operations are such down, which leads to economic difficulties (Kaseke& Hosking, 2013).
Poor power generation also causes problems for agriculture. Most irrigation lines are run by
electricity, so when the power is cut out then the crop yield decreases , and thereby leading to
low production in food stuff .Nigerias energy grid is arguably in crisis due to lack of
development. The key to making a more reliable energy sector is to find and use renewable
energy resources, rather than simply relying on the countrys non-renewable resources for
power generation. The crisis of power generation is a complex problem stemming from a
variety of issues. This study will cover the Nexus between Electricity Generation and Supply
on Economic Growth in Nigeria between 2007 to 2015.

In Nigeria, the shortfall of electricity leads to the overuse of generators for energy. It is
estimated that about 30% of power generated is produced in this manner (Annual Energy
Outlook 2013,). Currently the only plan the government has in place to help solve the power
generation crisis is to expand the fossil fuel burning sector (Annual Energy Outlook , 2013).
It is rich in natural resources, which should and does create billions of dollars of revenue; the
production of the oil is not shared with the rest of the country. About 70% of people in
Nigeria live below the poverty line and the unemployment rate is 21). Alternative forms of
power generation are not used probably because of availability of oil in Nigeria, as it has the
worlds seventh largest oil reserves.
RESEARCH METHODOLOGY

REGRESSION ANALYSIS

Most of scientific studies are directed toward discovering the form of relationships between
variables, and predicting the values of a variable from some functional relationship.
Regression analysis is a statistical tool which helps to predict one variable from the other
variable or variables (Oyeka, 1996).

The simple regression model

A regression model may be simple or multiple, and linear or non- linear. It is simple if there is
only one independent variable and multiple if there is more than one independent variable in
the model. A regression model is linear if its parameters do not contain any exponents and are
not multiples of other parameters in model, otherwise the model is said to be non-linear.in
simple regression the model describing the relationship between X and Y can be expressed
as:

Yi 0 I X i i
(2.1)

i 1,2,....n
For

Where there are n observations on both X and Y and Yi is the ith observation on X. Xi is a

i
th
known constant representing the i observation on X, is an independently and normally

distributed random error term with mean 0 and constant variance Type equation here . 2.

o and 1 are the parameters.

METHOD OF LEAST SQUARES

One of the methods usually employed to obtain the desired line of fit is known as the method
of least squares, and the lined obtained is called the least square line. For each sample,
observation (Xi, Yi), the method of least squares considers the deviation of each Xi from its
expected values. Its model without proof is given as:
i Yi - ( 0 i X i )
(2.2)

Where,

n n n

X iYi X i Yi
bi i 1 i 1 i 1
2
n
n

n X i
2
X i
i 1 i 1
(2.3)

and

n n n n

Y
i 1
i bi X i
i 1
Y
i 1
i X
i 1
i

b0 b0 bi Y bi X
n n n
= (2.4)

X Y
Where and are the means of the x and y respectively.

Also, b0 and biare said to be estimator and can be shown to be an unbiased estimator. i.e.

E b0 0 E bi 1
and Thus the least square estimators are more precise than any of
these other estimators.

2.3.4 RESIDUALS

It is important to clearly distinguish between the observed value of Yi represented by


equation (3.1) and the estimated or flitted value of Yi written as

Y b0 bi X i
(2.5)

The observed value Yi refers to the actual value of the dependent variable made during the i th

Y
trial of an experiment, while is its corresponding fitted or estimated value using the
regression line as a means of estimation. The observed and the estimated values of a variable
i
th
at the i trial may not be equal. The different between the two is called the residual, given
as:

i Yi Yi Yi b0 b1 X i
(2.6)

2.3.5 SIMPLE REGRESSION AND ANALYSIS OF VARIANCE

Yi
As in analysis of variance, in regression analysis the variation of the is conventionally

Yi Y
measured in terms of the deviations: (2.6)

The total deviation can be partition into two components:

deviation of fitted value from the mean and deviation of actual value from fitted value.

Thus :


Yi Y (Y Y ) (Yi Y )
(2.7)

Where

Yi Y
- Total Deviation

(Y Y )
- Deviation of actual from fitted value

(Yi Y )
- Deviation of fitted value from the mean.

SS T
The measure of total variation denoted as for actual sum of squared deviation is given as

Y
n 2

i Y
SS T i 1
= (2.8)
And it measures the variations in the Yi when the independent variable X is not considered.
Also to total sum of square can be obtainable as:

Y
2 2 2


n n n

i Y Yi Y Yi Y
i 1 i 1 i 1
(2.9)

2 2

Y Y Y b
n n
bi X i
i 1
i
i 1
i 0
SS E
Where is the sum of squares of error and


2
n
SS R Yi Y
i 1
is the sum of squares of regression.

2.1.5 COMPUTATIONAL FORMAULAR

The definitional formula for SST ,SSe SSR can be obtained as:

2
n

n
Y i

SS T Yi 2 i 1

i 1 n
(2.10)

n n

n X iYi Yi n

SS R bi

Xi
i 1
i 1

n
i 1
bi

X Y i 1
i i nXY

2.11

(


2

n

n
1 n n
2
n
Y i

X Y
i i X i Yi

Y
n
SS E
2 i 1 i 1 i 1 i 1
2
i 1 n n




n
X i


X i2
i 1
i 1

n


(2.12)
n n

X Y
2
i i
n
n I i 1
(Y ) 2 X iY
i 1
n
n
ss E Y
i 1 i 1 i
2

i
n n

2
i 1




n
X
X
2 i 1

i
n
i 1

(2.13)

Therefore:

SSE SST SSR


(2.14)

2.3.6 MEAN SQUARES

In partitioning of the total sum of squares in regression analysis there is a partitioning of the
associated degree of freedom and also the associated degree of freedom and also the associate
mean squares obtained by dividing the sum of squares by their corresponding degrees of

SS T n 1 SS R
freedom. as before has degree of freedom. The regression sum of squares,
has 1(one) degree of freedom associated with it resulting from the fact that there is only one
independent variable (treatment) involved in simple regression. The degree of freedom

SS E
associated to is obtained by subtraction as:

n 1 1 n 2

Hence the Regression mean square is obtained as:

SS R
MS R SS R
1
(2.15)

SS E
MS E
n2
(2.16)

MODEL SPECIFICATION

The model for this study is simple linear regression models which can be expressed as:
RGDP 0 i TEG i
(2.17)

RGDP 0 i TES i
(2.18)

Where RGDP is the Response or dependant variable which represents the Real gross
Domestic product. TEG is an independent variable which represents the total Energy
Generated and TES also an independent variable which denotes the total Energy sent out
within Nigeria from 2007 to 2015.

DATA PRESENTATION AND ANALYSIS

DATA PRESENTATION

Data collected for this study is presented in table1.

Table 1: Table showing distribution of Total Energy Generation (MWh), Total Energy sent out
(MWh) and RGDP from 2007-2015

Year Total energy Generated (MWh) Total Energy sent out MWh RGDP
2007 22519330.5 21546192.2 634.3
2008 18058894.9 17545382.5 672.2
2009 18904588.9 18342034.7 716.9
2010 24556331.5 23939898.9 775.3

2011 27521772.5 26766992.00 884


2012 29240239.2 28699300.8 888.9
2013 29537539.4 28837199.8 950.1
2014 29697360.1 29013501.0 955.2
2015 34647104.8 31981771.4 536675.07
Total 234, 683, 161.8 226672273.1 54 3149.97

Source: (NBS) 2015 and (NERC) 2015

THE REGRESSION ANALYSIS FOR ACCESSING THE IMPACT OF TOTAL


ENERGY GENERATED ON THE ECONOMIC GROWTH IN NIGERIA

Ho: there is no significant linear relationship between Total energy generated and Economic
growth in Nigeria between the years under study.

Hi: there exist significant relationship between Total energy generated and economic growth
in Nigeria.

Table 2: Result of regression analysis for estimating RGDP with respect to TEG

Dependent variable- RGDP


Method- Least square
Sample-2007-2015
Included observation-9
0 1TEG
Model: RGDP=
Coeficient Std Error t-Statistic Prob.
0 -436349.775 264870.972
-1.647 0.143
1 0.019 0.010
1.912 0.097
R-squared 0.343
Adj R-squared 0.249
S.e regression 0.586
Sum squ. Resid 167684781837.67
8
F-statistic 3.655
Prob(F-stat) 0.097
Table 3: The Descriptive Result of RGDP And TEG
Mean Std. Deviation N
RGDP 60350.2189 178621.85841 9
TEG 26075906.8667 5492328.86482 9

Table 4: Result of regression analysis for estimating RGDP with respect to TES

Dependent variable- RGDP


Method- Least square
Sample-2007-2015
Included observation-9
0 1TEG
Model: RGDP=
Coeficient Std Error t-Statistic Prob.
0 293485.58
-378906.710 -1.291 0.238
5
1 0.017 0.011 1.524 0.171
R-squared 0.249
Adj R-squared .142
S.e regression 165471.32364
Sum squ. Resid 191665312626.68
1
F-statistic 2.322
Prob(F-stat) 0.171

Table 5. The Descriptive Result of RGDP And TES

Mean Std. Deviation N


RGDP 60350.2189 178621.85841 9

TES 25185808.1444 5111582.63494 9

Figure 1: Graph of the distribution of RGDP, TES


35000000
30000000
25000000
20000000 Total Energy sent out MWh
15000000 RGDP

10000000
5000000
0
1 2 3 4 5 6 7 8 9

Figure 2: Graph of the distribution of RGDP, TES

40000000

35000000

30000000

25000000

20000000

15000000

10000000

5000000

0
1 2 3 4 5 6 7 8 9

RGDP Total energy Generated (MWh)


DISCUSSION OF RESULT

The result of the analysis displayed in table 2 found an F-value of 3.655 and a p-value of
0.097 which falls on the acceptance region of the hypothesis assuming 95% confidence level
(since p-value=0.097 is greater than =0.05).the result also found a t-value of 1.912 and a
corresponding p-value of 0.097 which falls on the acceptance region of the Hypothesis
assuming 95% confidence level. Also, R-square value of 0.343(34.3%) was equally obtained
from the analysis which implies that the independence variable TEG was able to explain
34.3% of total variation in RGDP. This result implies a weak adequacy of the model obtained
in estimating RGDP.

From the descriptive result it is found that the average energy generated is 26075906.8667
and the average real gross domestic product is 60350.2189 with standard deviation of
178621.85841 and 5492328.86482 respectively.

The graph of the RGDP and TEG show that there was a sharp decrease and increase in the
year 2008 and 2015 respectively for TEG. While there exist an increase in the year 2015 for
the RGDP.

The result of the analysis displayed in table 4 found an F-value of 2.322and a p-value of
0.171 which falls on the acceptance region of the hypothesis assuming 95% confidence level
(since p-value=0.171 is greater than =0.05).the result also found a t-value of 1.524 and a
corresponding p-value of 0.171which falls on the acceptance region of the Hypothesis
assuming 95% confidence level. Also, R-square value of 0.249 (24.9%) which was equally
obtained from the analysis which implies that the independence variable TES was able to
explain 24.9% of total variation in RGDP. This result implies a weak adequacy of the model
obtained in estimating RGDP. From the descriptive result it was found that the average
energy generated was 25185808.1444 and the average real gross domestic product is
60350.2189 with standard deviation of 178621.85841and 5111582.63494 respectively. The
graph of RGDP and TES show that there was a decrease and increase in the year 2008 and
2015 respectively for TES While there exist an increase in the year 2015 for the RGDP.

CONCLUSION
The study examined the contribution of total energy generated and total energy supplied on
economic growth in Nigeria. The findings of the study revealed that total energy generated
and total energy supplied does not significantly contribute to economic growth in Nigeria.
This result validates the cry of the Nigerian masses on the sorry state of energy generated and
supplied to consumer in Nigeria regardless of the reforms and privatization of the industry.

It is obvious that that the privatization of the electricity sector does not impact on the
economic growth in Nigeria within the period under study. Findings showed that the
electricity generation in the country has quite been on the increase over the years under study
but the high demand of power supply and increase in the population with in the country could
be a key factor to the non performance of the sector on the economy.

The findings of the study show that total energy generated and sent out have no significant
impact on economic growth in Nigeria. This implies that they do not explain the behavior or
the variation existing on economic growth in Nigeria. Hence the model obtained was found to
be inadequate in explaining economic growth in Nigeria which implies that total energy
generated and sent out does not contribute to the economic growth in Nigeria.

REFERENCES

Anaekwe, E. N. (2010). Investment Opportunity in Nigeria. Retrieved from www.


farriconsultingng.blogspot.com.

Kaseke, N., & Hosking, S. (2013). Sub-Saharan Africa Electricity Supply Inadequacy:
Implications. Eastern Africa Social Science Research Review. 29(2), 113-132.

Okoli,C.N, Aronu,C.O, Nwosu, C.A, Osuji,G.A, Ugwu,D.N, Ekezie, C.K (2015). Modern
Statistical Methods And Applications For Science And Engineering With Practical
Manual.Divine press and publishers.No 96 Arthur Eze Road, Awka.

Onyeka C. A (1996).Introduction To Applied Statistical Methods.


Modern Printers (NIG.). 37 Abakaliki Road Emene Enugu.
Annual Energy Outlook 2013 - US Energy Information Administration
https://www.eia.gov/outlooks/aeo/pdf/0383(2013).pdfDec 23, 2011 - The Annual Energy
Outlook 2013 (AEO2013) was prepared by the U.S. ...Administrator of Energy
Analysis; Paul D. Holtberg (paul.holtberg@.

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