Multivariate Causality Test on Electricity Consumption, Capital, Labour and Economic Growth for Nigeria

Abstract

This study examines the causal relationship between electricity consumption
and economic growth in Nigeria from 1980 to 2008. The model is augmented
with the inclusion of capital and labour as added regressors. Utilizing ARDL
bound test to identify existence of long run interaction, we employ Granger
causality test to identify causality among the variables and supplement the
ARDL with FMOLS and DOLS to compute the long run estimates. Results
suggest one-way causation flowing from electricity use to economic growth
in Nigeria, in consonance with the findings of Akinlo (2009) and Squalli
(2007) on Nigeria. Besides, the short run and long run estimates signify that
electricity use is positively associated with economic growth, thereby
reinforcing causality findings. The results generally call for energy
expansionary policies. As the study also notes significant positive causality
from capital and labour to economic growth, this means that beyond
electricity consumption, capital and labour are the key determinants of
economic growth in Nigeria.