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Macroeconomic Drivers of Electricity Prices in Nigeria

Author

Listed:
  • Mansur Bala

    (Department of Economics, Sokoto State University, Sokoto, Nigeria)

  • Nasir Ahmad Moyi

    (Department of Economics, Sokoto State University, Sokoto, Nigeria)

  • Umar Muhammad Gummi

    (Department of Economics, Sokoto State University, Sokoto, Nigeria)

Abstract

Electricity price volatility in developing economies, particularly Nigeria, presents a significant challenge to sustainable development. In this paper, we examine the macroeconomic drivers of electricity prices (ELP) in Nigeria based on annual data spanning 1980-2022 and the autoregressive distributed lag (ARDL) procedure. Our model estimates the long-run and short-run impacts of population growth (PG), economic growth (GDP), crude oil price (COPR), and electricity consumption (ELC) on electricity prices (ELP). The empirical findings reveal a positive and long-run effect of PG on ELP, indicating that rising demand from a growing population increases electricity prices. In the short-run, ELC surprisingly co-moved with ELP, which may be attributable to price-sensitive demand within specific consumer segments or periods. Furthermore, GDP and COPR exert positive effects on ELP, indicating that economic growth drives energy consumption and prices, and the cost-driven impact of fossil fuel dependence in electricity generation. These findings shed light on the complex interplay of demographic, economic, and energy market-related forces driving electricity prices in Nigeria. Therefore, the paper proposes some policy suggestions based on the empirical findings.

Suggested Citation

  • Mansur Bala & Nasir Ahmad Moyi & Umar Muhammad Gummi, 2024. "Macroeconomic Drivers of Electricity Prices in Nigeria," Energy Technologies and Environment, Anser Press, vol. 2(3), pages 17-33, September.
    • Handle: RePEc:bba:j00006:v:2:y:2024:i:3:p:17-33:d:341
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