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Impact of Energy Consumption and Environmental Degradation on Economic Growth in Nigeria

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  • Yusuf, Sulaimon Aremu

Abstract

The argument concerning the contribution of energy towards the growth objective and the adverse environmental impact its consumption brings along are contentious, whether to reduce energy consumption in order to reduce negative externality as it is just an intermediate input which its contribution is insignificant to the accomplishment of growth objective is the curiosity behind this study. The study empirically examined the impact of energy consumption and carbon emission on economic growth in Nigeria between 1981 and 2011. The research takes analytical/quantitative dimension. It is a multivariate study by including in the model two conventional determinants of Economic Growth, Capital proxy by Gross Capital Formation, labour proxy by labour participation rate, and other variables of study which are electricity consumption, energy use kt in oil equivalent and Co2 emission. Restricted Error Correction Model (VAR) is used, Impulse Response function was carried out and the necessary diagnostic tests were examined with the aid of Econometrics View Package (E- view). The study reveals that the long run relationship exists among the variables and electricity contributes significantly to the economic growth. Further investigation using Granger causality analysis to examine the causal directions among the variables reveals bidirectional causality between electricity consumption and economic growth and indicates unidirectional causality running from energy use kt of oil to carbon emission. This brings the study to conclusion that electricity is not just an intermediate input; its contribution to the accomplishment of growth objective cannot be relegated to the background. Hence, Nigeria can pursue triple goals of energy security by exploiting renewable energy source, environmental sustainability and sustainable inclusive growth. Therefore necessary recommendations were made.

Suggested Citation

  • Yusuf, Sulaimon Aremu, 2014. "Impact of Energy Consumption and Environmental Degradation on Economic Growth in Nigeria," MPRA Paper 55529, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:55529
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    File URL: https://mpra.ub.uni-muenchen.de/55529/1/MPRA_paper_55529.pdf
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    References listed on IDEAS

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    1. Eggoh, Jude C. & Bangake, Chrysost & Rault, Christophe, 2011. "Energy consumption and economic growth revisited in African countries," Energy Policy, Elsevier, vol. 39(11), pages 7408-7421.
    2. Akinlo, A.E., 2008. "Energy consumption and economic growth: Evidence from 11 Sub-Sahara African countries," Energy Economics, Elsevier, vol. 30(5), pages 2391-2400, September.
    3. Jahangir Alam, Mohammad & Ara Begum, Ismat & Buysse, Jeroen & Van Huylenbroeck, Guido, 2012. "Energy consumption, carbon emissions and economic growth nexus in Bangladesh: Cointegration and dynamic causality analysis," Energy Policy, Elsevier, vol. 45(C), pages 217-225.
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    Cited by:

    1. Asongu, Simplice & Agboola, Mary & Alola, Andrew & Bekun, Festus, 2019. "The criticality of growth, urbanization, electricity and fossil fuel consumption to environment sustainability in Africa," MPRA Paper 102056, University Library of Munich, Germany.
    2. Md. Nazmus Sadekin & Md. Mahbub Alam & Syed Moudud-Ul-Huq & Mohammad Ghozali Hassan & Tarequl Islam, 2021. "Do Energy Consumption and Environmental Degradation (CO2 Emissions) Matter for Economic Growth? Fresh Evidence from a Developing Economy," International Journal of Energy Economics and Policy, Econjournals, vol. 11(5), pages 289-297.
    3. Nurcan Kilinc-Ata, 2018. "Assessing the Future of Renewable Energy Consumption for United Kingdom, Turkey and Nigeria," Foresight and STI Governance (Foresight-Russia till No. 3/2015), National Research University Higher School of Economics, vol. 12(4), pages 62-77.
    4. Gideon Nkam Taka & Ta Thi Huong & Izhar Hussain Shah & Hung-Suck Park, 2020. "Determinants of Energy-Based CO 2 Emissions in Ethiopia: A Decomposition Analysis from 1990 to 2017," Sustainability, MDPI, vol. 12(10), pages 1-17, May.
    5. Yusuf, Sulaimon Aremu, 2014. "Energy Sector is critical to Nigeria Growth and Development: Perspective to Electricity Sub-sector in Nigeria," MPRA Paper 55689, University Library of Munich, Germany.

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    More about this item

    Keywords

    Energy Consumption; Carbon Emission; Economic Growth;
    All these keywords.

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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