Energy Consumption and Economic Growth Sustainability in Nigeria: a Time Series Analysis
Year: 2026
Type: article
Abstract: This study investigates the dynamic impact of disaggregated energy consumption on economic growth sustainability in Nigeria. Utilizing an ex-post facto research design, the study deploys annual time-series data spanning the 36-year period from 1990 to 2025. The econometric framework is built upon the structural properties of a log-linearized Vector Error Correction Model (VECM), derived from an expanded neoclassical production function and anchored on the Environmental Kuznets Curve (EKC) hypothesis. Empirical stationarity and cointegration properties are verified using the Augmented Dickey-Fuller (ADF), and Johansen frameworks. The empirical findings from the long-run cointegrating vector reveal that both non-renewable energy consumption (NREC) and renewable energy consumption (REC) exert a statistically significant, positive long-run impact on economic growth sustainability, with elasticity coefficients of 0.5411 and 0.3142 respectively. This demonstrates that while carbon-intensive fossil fuels remain the dominant catalyst for short-term industrial and transport activities, clean energy channels offer a vital, low-emission trajectory for long-term sustainable growth. Furthermore, the inclusion of Real Gross Fixed Capital Formation (GFCF) as a macroeconomic control variable yields a significant long-run elasticity coefficient of 0.1874, confirming that physical infrastructure investments serve as a vital transmission channel that amplifies energy productivity. In the short-run dynamic VECM model, the Subsidy Removal Indicator (D1) yields a negative and statistically significant parameter (-0.0418), proving that the mid-2023 complete downstream petroleum sector deregulation induced a sharp contractionary structural break in the domestic economy. However, the system displays a statistically significant Error Correction Term (ECTt-1) coefficient of -0.3842, implying that following an economic or policy-induced shock, approximately 38.42% of the systemic disequilibrium is corrected annually as the economy transitions back to its long-run steady-state path. Based on these findings, the study recommends that the Federal Ministry of Power and the Rural Electrification Agency (REA) eliminate import duties on solar energy components to scale up the contribution of renewables. Additionally, the Central Bank of Nigeria (CBN) should establish a green micro-credit intervention fund to help small and medium enterprises (SMEs) transition smoothly away from fossil-fuel dependencies post-subsidy removal.
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7225649524
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