ELECTRICITY SUPPLY AND INDUSTRIAL OUTPUT IN NIGERIA: A TIME SERIES ANALYSIS

ABSTRACT The study examines electricity supply and industrial output in Nigeria. Data were extracted from World Development Indicators (WDI), Microtrent.net, and Central Bank of Nigeria (CBN) statistical bulletin. Augmented Dickey Fuller (ADF) test was used to detect the presence of unit root among the variables. From the ADF test, IND, IELEC, and INFLRAT, were found to be stationary at first difference I(1) while INTRAT is stationary at level I(0) given the 1% level of significance. Optimal lag selection test was conducted using Schwarz information criterion (SC) and ARDL bounds test approach was used to test for cointegration among the variables of study and were found to have a long-run equilibrating relationship. The long-run ARDL result revealed a significant positive relationship between industrial electricity consumption and industrial output over the study period. Inflation rate (INFLRAT) revealed a negative and insignificant impact on industrial output. Also, Interest rate (INTRAT) was also found to have a negative and insignificant impact on industrial output. The coefficient of determination shows that 92% of the proportion of the dependent variable has been explained by the explanatory variables, while only 8% of the variation is caused by the error term in the model. The Durbin Watson statistics is 1.490642 which indicates that the model is good fit; because it falls within the range of 1.5 and 2.5. In conclusion, the major findings from the study revealed that, industrial electricity consumption has significant impact on industrial out-put in Nigeria. It is recommended that proactive policies to improve electricity generation to drive industrial growth and development. Credits allocated to the industrial sector should be improved upon for industrial development and growth in Nigeria.