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| Fig. 1: Transmission Lines (Source: Wikimedia Commons). |
The importance of studying the correlation between Gross Domestic Product (total value of goods produced and services provided in a country during one year) and energy consumption is evident. Over the years, data has demonstrated that the two are inseparable; countries need more energy to produce more goods. [1] Evidence of this casual relationship began to emerge in 1978 when the Kraft and Kraft study found unidirectional causality running from GDP to energy consumption for the United States. [2] Therefore, developed countries tend to consume more energy and have a higher GDP than developing countries. However, it is essential to examine a specific country, like Nigeria, to understand how closely related the two factors are, and if they are indeed truly inseparable.
The National Electric Power Authority (NEPA) has the responsibility of providing and distributing electricity across the country, but has been unable to do so due to several challenges. For example, 27% of electrical plants in Nigeria have overloaded or overstretched transmission lines (Fig. 1). [3] The transmission lines are therefore unable to conduct and carry electrical signals without great energy loss. Additionally, hydroelectric plants, which rely on water, are inadequate in generating electricity when dry season comes around. As a result, the breakdown of electrical equipment ensues. This current status of electricity supply in Nigeria reflects a situation of supply crisis in which industrial growth and socio-economic development paces are kept below the potential of the economy. [3]
Limited access to both electricity and a steady power supply has been a major hindrance to Nigera's economic success. Because GDP and energy consumption are correlated, Nigeria must rely on improving their energy supply in order to increase productivity. One major way to increase universal access to energy is to both diversify the country's power-generation portfolio and to collaborate with the private sector within the context of public-private partnership to further exploit opportunities in the sector. [4] The influx of money and investments could stimulate the electrical market. This would not only benefit the investors, who would gain profit from their foreign or private investments, but also the Nigerian citizens because supply would be higher and energy costs would be lower.
The correlation between GDP and energy consumption is so essential to examine because of the role it plays in a country's success. As shown in the case of Nigeria, limited access to electricity negatively affects the country's prosperity, as the two factors are directly related. This calls for the need to strengthen the effectiveness of energy generation agencies by providing proper tools and replacing inadequate equipment. [3] Making a push towards improving energy supplies will positively affect Nigeria for years to come.
© Maggie Nick. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] S. M. De Bruyn, Economic Growth and the Environment: An Empirical Analysis (Kluwer Academic, 2000).
[2] U. Soytas and R. Sari, "Energy Consumption and GDP: Causality Relationship in G-7 Countries and Emerging Markets," Energy Econ. 25, 33 (2003).
[3] A. A. Ogundipe and O. Akinyemi, "Electricity Consumption and Economic Development in Nigeria," Journal of Business Management and Applied Economics 2, No. 4, 1 (2013).
[4] A. Onakoya
