Renewable energy consumption and economic growth in Nigeria: any causal relationship?

Abstract

This study examined the effect of renewable energy consumption on economic growth in Nigeria for the period 1990 to 2016. It further investigated the direction of causality between renewable energy consumption and economic growth in Nigeria. This was with a view to providing information on the relationship between renewable energy consumption and economic growth in Nigeria within the period of the study. Data collected was analysed using both descriptive analysis and econometric technique, which included unit root, correlation, co-integration, regression, and granger causality tests. The result showed that although renewable energy consumption and economic growth increased between 1990 and 2016 in Nigeria, renewable energy consumption had no significant positive impact on economic growth in Nigeria. Furthermore, there was no causality between renewable energy consumption and economic growth in Nigeria during the period of study. The study concluded that renewable energy consumption exerted an insignificant negative impact on economic growth in Nigeria. We recommend that investing in renewable energy should be encouraged and enhanced as this may be a way to reduce domestic fossil fuel consumption or to meet increasing energy demand without an increase of domestic fuel consumption to increase fuel exports and thus for higher revenues.

Revisiting the Nexus between Renewable Energy Consumption and Economic Growth in Nigeria: The VECM Approach

“…From the result below, it was reported that there exist no causality at F-statistics (P-value) 2.13567 (0.1392) and 1.22532 (0.3107) running from renewable energy consumption to gross domestic product at 5% significant level and vice versa. This finding conforms to a-priori expectations and corroborates the view of Azeakpono and Lloyd [20] that there is no causal link between the variables. Hence, the result indicates that there is no causality either unidirectional or bi-directional between renewable energy consumption and gross domestic product.…”

“…Additionally, as indicated by Apergis and Danuletiu [40], Azeakpono and Lloyd [20], prior research on the nature of the relationship between renewable energy and economic growth has been inconclusive, as majority of studies reviewed do not show that energy consumption has long-term effects on overall economic growth and there aren't many impartial analyses of the Nigerian case in terms of growth [41,42,43]. Therefore, given the arguments above; this study seeks to contribute to the existing body of knowledge on the topic by conducting a study on Nigeria and to also examine the effect of renewable energy consumption on economic growth between 1990 and 2022.…”

“…Using ARDL cointegration techniques and the Granger causality test, Azeakpono and Lloyd [20] investigate "the impact of renewable energy consumption on economic growth as well as the direction of causality among the major variables. They came to the conclusion that renewable energy has a negligible adverse effect on economic growth, while emphasizing that there is no causal link between the variables".…”

“…As emphasized by Azeakpono and Lloyd [20] energy is a crucial enabler that has an impact on a variety of aspects of human and economic development. "Without sufficient energy capacity and affordable modern energy services, economic growth and development may be limited.…”

“…"Renewable energy sources, such as wind, solar, and hydroelectric power, have been found to contribute more to economic growth" (Alao-Owunna et al 2021, Bușu, 2018) [28,29,30; 31,32,33,34,35] [36,37]. Also, it can be deduced from the reviewed literatures that the topic of renewable energy and economic growth has been studied from different perspectives ranging from the study of Masih and Masih [38] , Cheng (1999), Apergis and Payne [39] 2016), [18], Azeakpono & Lloyd [20] for Nigeria , Kayani 2021 for United Arab Emirate to Azeakpono and Lloyd (2022). However, only few of the above are country specific while it also shows that there is no consensus among the empirical literatures reviewed on the effect, the direction of the relationship and causality between renewable energy and economic growth both in the shortrun and long -run.…”