ENERGY SUPPLY AND PRODUCTIVITY IN NIGERIAN ECONOMY A STUDY OF ELECTRICITY SUPPLY AND PRODUCTIVITY
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
In Nigeria, the relationship between energy and the economy has been the major focus of research and intellectual engagements since 1990. Energy is increasingly becoming a major force in the pursuit of sustainable development. According to Adeyemi, Opeyemi, and Oluwatomisin (2016) the attribute of neutrality ascribed to energy by neoclassical model is contestable as consistent growing sources of modern energy could directly aid livelihoods, and indirectly via promotion of economic growth. Meanwhile, Narayan and Smyth, (2009) observed that As a major source of energy, accessibility of electricity aids the process of meeting residential and domestic needs, positively contribute to capital and labour productivity, promotes export potentials of countries, creates employment and reduces the poverty level (Poveda and Martínez, 2011); this ultimately improves socio-economic development. Electricity as a secondary energy resource obtained from the conversion of primary energy such as fossil fuels (Yilmaz and Hasan, 2014), is a key component of consumption structure of households and industries. Its accessibility enhances productive domestic activities and industrialization. This further explains the focus on arguments addressing electricity consumption is the one that enhances growth or it is vice-versa.
Nigeria is seen as one of the greatest developing nations in Africa with highly endowed natural resources including potential energy resources. However, Gbadebo, and Chinedu (2009) reported that increasing access to energy in Nigeria has proved to be not only a continuous challenge but also a pressing issue with the international community. They further observed that ‘Economic growth is a prerequisite for a nation to move from a third world country to a developed country; for a developing country like Nigeria, the greater the economic growth, the better its chances to become more developed. With adequate utilization of energy potentials to meet the demand, the nation would experience high levels of economic growth.
Adegbemi, et al (2013) viewed that energy is widely regarded as a propelling force behind any economic activity and indeed industrial production. Therefore, high grade energy resources will amplify the impact of technology and create tremendous economic growth. High grade resources can act as facilitator of technology while low grade resources can dampen the forcefulness of new technology. Ojinnaka (1998) argued that the consumption of energy tracks with the national product. Hence, the scale of energy consumption per capita is an important indicator of economic modernization. Any countries that have higher per capita, energy consumption are more developed than those with low level of consumption. The importance of energy lies in other aspect of development - increase in foreign earnings when energy products are exported, transfer of technology in the process of exploration, production and marketing; increase in employment in energy industries; improvement of workers welfare through increase in worker's salary and wages, improvement in infrastructure and socio-economic activities in the process of energy resource exploitation. Thus, in the quest for optimal development and efficient management of available energy resources for economy productivity, Adegbemi, et al (2013) surmised that equitably allocation and efficient utilization can be adopted to put the economy on the part of sustainable growth and development.
Arising from this argument, adequate supply of energy thus becomes central to the radical transformation of the nation’s economy. In Nigeria, energy serves as the pillar of wealth creation evident by being the nucleus of operations and engine of growth for all sectors of the economy productivity. The output of the energy sector (electricity and the petroleum products) usually consolidate the activities of the other sectors which provide essential services to direct the production activities in agriculture, manufacturing, mining, commerce just to mention few. Nigeria is endowed with abundant energy resources but suffers from perennial energy crisis which has defied solution. The co-existence of vast wealth in natural resources and extreme personal poverty refers to as the “resource curse” or 'Dutch disease' (Auty, 1993) afflicts Nigeria. The size of the economy marked by the Gross National Income per capita is put at $1,190 and ranked 162 out of 213 countries in the world development index in 2009 (The World Bank, 2011). On economic growth, the GDP per capita of Nigeria expanded by 132 percent between independence in 1960 and 1969, and rose to a peak growth of 283 percent between 1970 and 1979. The severity of this malaise led to the restructuring of the economy in 1986. In the period 1988-1997 which constitutes the period of structural economic adjustment and liberalization, the GDP responded to economic adjustment policies and grew at a positive rate of 4 percent. In 2006, the real GDP growth rate was 7 percent. The economy when measured by the real GDP, grew by 7.87% in 2010. (National Bureau of Statistics-NBS, 2010 and Central Bank of Nigeria - CBN, 2010) in (European Scientific Journal, February 2013). The average power per capita (in watts) in USA, Japan, South Africa, China, India and Nigeria were 1,363, 774, 496, 397, 85, and 12 respectively. These roughly correlate with the GDP per capita of the countries in 2008 (The World fact book, 2008).
Ironically, while Nigerian energy resources, particularly oil, are exported to other countries; its people and economy suffer from severe shortages of the same product. This is manifested by the epileptic supply of electricity and perennial shortage of most petroleum products. Furthermore, the need to determine the relationship and the impact of electricity on economic growth derives from the increasing realization of the importance of energy to the economic development of a nation. This has led many to question the conventional neoclassical production function analysis where land, labour, capital are recognized as the main factors of production. This analysis has been extended to include an energy variable (Romer, 2009).
However, the magnitude of energy influence in the economy has been hotly debated by the macro economists such as: Paul Samuelson (1915-2009) , Franco Modigliani (1918-2003), James Tobin (1918-2002) just to mention few. Consequently, efforts have been made to discover the exact relationship between energy and the other factors of production as to whether energy complements or substitutes other factors of production. Thus, this study focuses on energy supply and productivity in Nigeria with a view to finding out if sources of energy have varying impact on economic growth.
1.2 Statement of the Problem
Over the years, series of research has proved that the Nigerian energy crisis has stymied the socio economic activities of the country which has brought untold hardship on the people of the country. At the moment, the electricity supply in Nigeria does not meet national demand. This is based on the existing connections to the grid which does not take into account the suppressed demand. Also, the projected electricity demand has been translated into demand for grid electricity and peak demand on the bases of assumptions made for transmission and distribution losses, auxiliary consumption, load factor and declining non-grid generation (Energy Information Administration, 2012)
According to World Bank report, (2015), about 75 million Nigerians lacked access to adequate electricity and Nigeria was ranked highest amongst the countries with electricity access deficit when energy access, efficiency and renewable are on the rise in many developing nations. Much of the electricity distribution network at 2010 -2016 was poorly maintained and the supply in a lot of areas was often described as epileptic in nature, characterized by extreme voltage variations, load discharges, frequent and long outages and reliance by small scale businesses, industries and affluent individuals on off-grid generation.
Currently, the poor state of energy supply in Nigeria was widely viewed as one of the major constraints to the nation’s economic productivity. While Nigeria has an abundant supply of natural resources, including large reserves of oil and gas, it had one of the lowest net electricity generations. Thus, the study sought to examine the relationship between energy supply and productivity in Nigeria Economy.
1.3 Objectives of the Study
The objective of the Study is to examine the effect of energy supply and productivity in Nigeria economy. Hence, the following are specific objectives:
1. To examine the relationship between energy (Electricity) supply and economic productivity in Nigeria.
2. To the challenges facing the relationship between energy (Electricity) supply and economic productivity in Nigeria.
3. To proffer solutions to establish cordial relationship between energy (Electricity) supply and economic productivity in Nigeria.
1.4 Research Questions
The study seeks to answer the following research questions;
1. What is the relationship between energy (Electricity) supply and productivity in Nigerian economy?
2. What are the challenges facing the relationship between energy (Electricity) supply and economic productivity in Nigeria?
3. What are the proffer solutions to establish cordial relationship between energy (Electricity) supply and economic productivity in Nigeria?
1.5 Research Hypotheses
1) There is no significant relationship between energy (Electricity) supply and productivity in Nigerian economy.
2) There is significant challenge facing energy (Electricity) supply and productivity in Nigerian economy.
3) There is no significant solution to establish cordial relationship between energy (Electricity) supply and economic productivity in Nigeria.
1.6 The Significance of Study
It is anticipated that the finding of this study would have impact on the following groups:- the government, energy supply management, business organisations and general masses. It is hoped that the finding of the study would revealed the importance of energy supply to economy productivity in Nigeria.
The research findings will be useful for government, as it will make them appreciate the need of energy supply as a prerequisite good productivity in Nigeria economy. Also, the outcomes of this study also suggest the need for the government to provide necessary means to enhance energy supply.
It is expected that findings from this study would acquaint the prospective and the existing business organisations and the general masses the means for extending their horizon of experience on how work collectively in making with government on how to ensure proper supply of energy (electricity) for better increase in productivity of Nigeria economy. Finally, the finding of the study would suggest solutions to the factors that may hinder their success in economy productivity as they emanate from energy supply.
1.7 Scope of the study
The study is exclusively focused on energy supply and productivity in Nigeria with a view to finding out if sources of energy have varying impact on economic growth. The study will be narrowed on electricity supply and productivity in Oyo town; and it will cover only two local Governments. In other words, community members will be randomly picked in each local Government for the purpose of this study.
1.8 Definition of Terms
Energy: scientific form of power such as electricity.
Supply: to make available or to provide someone with what is needed for a task or activity.
Productivity: the rate at which goods are produced or work is completed.
Natural resources: they are resources that exist without any actions of humankind. They occur naturally and they can be sorted into two categories: biotic and abiotic
Consumption: the action of using up a resource. It is seen as contrast to investing.
Electricity: is the flow of electrical power or charge. It is a secondary source of which means that we get it from the conversion of other sources of energy like coal, natural gas, oil, nuclear power and other natural resources which are called primary sources.
Economy growth: is an increase in the production of economic goods and services, compared from one period of time to another.
CHAPTER TWO
LITERATURE REVIEW
2.1 Electricity Power Sector in Nigeria
It is important to know that electric generation in Nigeria began in 1898 when the first generating plant was install in Lagos, under jurisdiction of public works and transport, though the Nigeria electricity supply company (NESCO) commenced operations as an electricity company in Nigeria in 1929 with the construction of hydro-electric power station at Kura near Jos, plateau state. Since then it has undergone many reforms in trying to connect every part of the country to the national transmission grid. In 1972, it was renamed Nigeria Electricity Power authority (NEPA).
Just like in India, the electricity sector in Nigeria is presently characterized by chronic power shortages and poor power quality supply. With an approximated installed capacity of 6000 MW (EPIC, 2004), it was stated that the country consumes about half its capacity. With an increased population coupled with diversification of economic activities, energy demand is rising but yet, electricity supply is relatively stagnant. It is therefore obvious that electricity demand is way above its supply thereby showing signs of potential economic growth. The inefficiency as well as inadequate facilities to boost electricity supply has also been a major cause of the increasing gap between demand and supply of electricity. This could be due to the fact that there are only 9 working generating stations in Nigeria (3 hydro and 6 thermal). Out of the approximated 6000 MW of installed capacity in Nigeria, not more than 4500 MW is ever produced. This is due to poor maintenance, fluctuation in water levels powering the hydro plants and the loss of electricity in transmission. It could also be due to the 80 MW export of electricity each to the republic of Niger and Benin.
According to Adeola (2017) “Apart from serving as a pillar of wealth creation in Nigeria, electricity is also the nucleus of operations and subsequently the engine of growth for all sector of the economy”, meanwhile, (Ayodele, 2004) had echoed that electricity consumption is positively related to economic growth and that the former is a cause factor of the latter. However, the law that established NEPA gave her the power to develop and maintain an efficient, coordinated economic system of electricity supply throughout the country. As part of the restructuring, the electricity power sector reform Act 2005 was enacted.
The reform Act paved way for the unbundling of PHCN into 18 companies: 1 Transmission Company, 6 generating companies, and 11 distributing companies. The generating company are made up of 2 hydro and 4 thermal (gas based) stations. Of recent, PHCN has an installed capacity of about 6000 MW through a number of hydro (Kainji, Jebba and Shiroro) and thermal stations (Egbin, Ughelli, Afam, Sapele). The transmission voltage levels are 330 KV for the grid transmission: 132KV for the transmission lines, whilst the 33KV, 11 KV and lower voltage constitute the distribution networks. The system normal frequency is 50Hz. Most of these electricity plants are underutilized or not functioning (Emeka 2010).
This is in supported of the view of Okafor (2007); Adeoghe (2010); Iwayemi (2008), to mention a view that only 40% of Nigeria has access to electricity. However, majority of the electricity is supplied to the urban areas. It was stated that the country consumes less than 20 per cent of its required capacity. With an increased in and diversification of economics activities, energy demand is rising but yet, electricity supply is relatively stagnant has argued by Yusuf (2014). It is therefore obvious that electricity demand is far above its supply which is an indicator of potential economic productivity.
The essence of electricity in a nation is one so pertinent that generating set is owned by most Nigeria where electricity is in short supply, rational use of energy has been professed as a measure to enhance consumption of electricity. In recognition that the problem of power supply is a challenging one scuttling socio-economic activities across the country, the civilian administration in Nigeria since its advent in 1999 started making huge investments in the energy sector. However, existing power stations and their installed capacities as shown on Table are: Oji Thermal Station, Enugu State (30MW); Delta thermal, Delta state (900MW); Ijora Thermal Lagos state (60MW); Sapele Thermal, Delta State (1020MW); Kainji hydro, Niger state (969MW); Egbin Thermal, Lagos State (1320MW) and Shiroro Hydro, Niger state (600MW). Whit the installed capacity of about 6000megawatts, the country’s electricity generation hovers between 3000 to 4000 megawatts (Yusuf 2014). Available records show that the government has set 10000 megawatts targets to be achieved by the end of 2015 as it has invested in new power projects that have been privatized to six generation companies and nine distribution companies with the existence of Nigeria Electricity Regulation Commission (NERC) in October, 2013. The Distribution Companies are:
(1) Sahelian - Kano 2) Kahn Consortim - Abuja Disco
(3) Aura Energy - Jos (4) West Power Gas – Eko
(5) 4 Power Consortium – Port Harcourt (6) Intergrated Energy - Ibadan & Yola
(7) NEDC/KEPCO – Ikeja (8) Interstate – Enugu
(9) Vigeo - Benin
The Generation Companies are:
(1) Mainstream Energy – Kainji & Jebba Gencos (2) North South – Shiroro
(3) Transcorp – Ughelli (4) Wood Rock – Ughelli
(5) Amperion – Geregu (6) NEDC/KEPCO – Ikeja.
2.2 The Nigeria Power Reform Act (2005)
Ishola (2005) explicitly explains that power sector reforms is being pursued in many countries on the promise that a reformed system would be more efficient and effective in addressing power demand and meeting the sustainable development agenda. According to the World Bank (1994) power sector reform seeks to improve performance, supply side efficiency and demand side efficiency. Considering the usefulness of electricity which is the ability to improve the social status through facilitates provision of basic needs such as health, education, food and water source of employment, yet many developing countries enjoy significantly low levels of electrification. In view of this electricity status in Nigeria, a successful reform needs to ensure universal access to reliable electricity.
Prior the year 2000, electricity sector has experienced no meaningful reforms in the sector since 1896, the first recorded electricity generation in Nigeria, and 1972, the period of amalgamation of electricity company of Nigeria (ECN) and Niger Dams Authority (NDA) into National Electricity Power Authority (NEPA.). Electricity reform in Nigeria is the critical approach to realization of effective generation, transmission and distribution of power. Immediately after the inauguration of the democratically elected civilian administration in 1999 led by President Olusegun Obasanjo, Electric Power Sector Reform Implementation Committee (EPIC) was inaugurated by National Council on Privatization (NCP) to recommend measures for sector reforms, promote policies goals of liberalization, competition and private sector led growth (Banwo and Ighodalo, 2006).
The Federal Government reforms agenda was informed by the following objectives:
I. To reduce the business operation cost in order to attract new investment through provision of quality and dependable power supply to the economy for industrial, commercial, and socio- domestic activities in Nigeria
II. II. To meet the growing demand for stable and reliable power required in small and medium business sectors.
III. To meet the desires and needs to be up to global standard in power generation and power consumption.
Reform is seen as the best option to change this poor power sector status in recognition of its importance to the development of Nigeria.
2.3 Nigeria Economy Situation
Nigeria’s oil reserves have played a significant role in its growing political and economic influence. The country is considered to be an emerging market by the World Bank and has been identified as a regional power on the Africa continent (Okafor 2017). Considering the enormous potential of the Nigeria state, it is assumed that it citizens should enjoy a better electricity supply, improved standard of living such as the availability of potable drinking water, easy access to health facilities, good road network, affordable shelters and affordable schools, and other basic necessities of life. The reality is that most Nigerians are leaving in abject poverty and inadequate and extreme cases lack of basic social amenities such as health facilities, motor able roads, and good shelters among others. One area in which the impacts of low investment have been strongly felt is in the Nigerian power sector.
Despite having the continent’s largest economy, Nigeria also has the highest number of Africans (96 million) living without access to electricity (International Energy Agency, 2015). Increasing access is important in poverty reduction in Nigeria. This can improve the productivity and output of enterprises; create jobs and free people from the burden of self-generation (which is usually more expensive). Greater access can create a positive feedback loop by increasing incomes and allowing the poorest to invest in education and other productive resources that are central to sustainable development (Practical Action Consulting, 2015). The FMINOR (2002) captures the implications of poor electricity supply on economic activities in Nigeria which states that:
"Technical losses in the system were more than 40%. When added to the poor payment patterns of customers in the system, collections have been less than 50% of power generated. This situation directly affected the nation's economy. Industrial capacity utilization declined significantly as industrialists resorted to the more expensive alternative power supply of running generators at a greater cost. This cost was eventually passed on to the end users of the products. Companies that could not afford this alternative source simply closed down. This has resulted in the intractable high unemployment rates that now prevail in the country" (FMINOR, 2002).
However, despite the huge annual budgetary allocations from the federal government the state of electricity supply in Nigeria is captured in the inaugural speech of President Muhammadu Buhari on May 29, 2015 captures the implications of poor electricity supply on Nigeria’s economic development when he remarked that:
"… No single cause can be identified to explain Nigeria's poor economic performance over the years than power situation. It is a national shame that an economy of 180 million generate only 4,000 MW and distributes even less. Continuous tinkering with the structures of the power supply and distribution and close on 20 billion dollars expanded since 1999 have only brought darkness, frustration, misery, and resignation among Nigerians. We will not allow this to go on" .
Moreover, the absence or limited supply of electricity will adversely affect a country's socio-economic productivity like business activities. This will also lead to infrastructural decay and collapse, closure of industries as well as a rapid decline in the availability of social amenities such as potable drinking water, improved health care services among others. DFID Programme report 2009 also points to the fact that the inadequacy of power sector is a serious challenge to Nigeria's economic productivity and to enhance the better standard of living for the vast population of the country. Besides, 60 percent of Nigerian populations have access to alternative power supply and consumption which is among the lowest in the world. It has been estimated that it would cost Nigeria $50 billion to ensure a reasonable electricity supply in Nigeria (DFID, 2009).
Similarly, the World Bank buttress the DFID assertion that “the quality of the electricity services is the largest barrier to business in Nigeria” (World Bank, 2009). Moreover, 90 percent of businesses in Nigeria have their own generators which provide 60 percent of the Nigerian population of their energy needs (Financial Time, 2009). In the same vein, a former Federal Permanent Secretary Chief Philip Asiodu remarked that: "There is a direct relationship between total energy consumption and growth of GDP" (Alike, 2017).
Another implication of poor power outage on Nigeria's economy productivity is such that companies and small and medium scale businesses that could not afford an alternative source of power supply close down. This has resulted in the intractable high rate of unemployment that now prevails in all parts of the country. Besides, industrial capacity utilization has reduced drastically as Industrialists resort to the more expensive alternative power supply of running generators at a higher cost. Another option for companies that cannot endure the high cost of production due to poor power supply often leave Lagos, Kano and other commercial towns and cities in Nigeria to countries like Ghana where they can be guaranteed of a considerable stable power supply (FMINOR, 2002). The UNDP Annual Report 2014 states that demand for energy in Nigeria has been raising at a rate more than the country can supply. As at 2014, more than 15 million households in Nigeria lack access to the national grid and most rural communities still depend on wood as a source of fuel for cooking and heating.
Thus, energy plays an important role in ensuring that basic human needs and services like shelter, clean water, and sanitation, health services are provided. The report added that the increasing demand for wood fuel, especially within rural communities continue to contribute to high levels of deforestation, greenhouse gases emissions, and pollution. Though this may be perceived as a local problem, it ultimately contributes to global environmental challenges like climate change. Policies exist to address environmental and climate change challenges. However, a lot more remains to be done to translate them to action at all tiers of government. The major power gaps seriously impede the growth of the non-oil sector and, as a result, job creation and poverty reduction. About 45% of the population has access to electricity, with only about 30% of their demand for Electricity are only been met.
2.4 Relationship between Energy Consumption and Economic Productivity
The positive relationship between electricity and economic productivity has been justified by some authors as being consistent. Many economists agree that there is a strong correlation between electricity use and economic development. Morimoto and Hope (2001) have discovered, using Pearson correlation coefficient that economic growth and energy consumption in Sri Lanka are highly correlated. Breshin (2004) said that electricity is vital for driving growth in the energy, manufacturing and social sector. He went further to say that a parallel (positive) growth trend existed between electricity demand and gross domestic product (GDP).
According to Simpson (1969), “it is electricity rather than Steam engine, which is driving the developing industries in modern Africa”. By implication, He re-emphasizes the fact that electricity drives economic productivity. Ageel and Mohammad (2001) ran a co-integration on energy and its relationship with economic growth in Pakistan, a developing nation like Nigeria and found that increase in electricity consumption leads to economic growth. Sanchis (2007) stated that “electricity as an industry is responsible for a great deal of output”. She went on to say that electricity had effects not only on factors of production but also on the impact it had on capital accumulation. Alam (2006) agrees that there is a departure from neoclassical economics which include only capital, labour and technology as factors of production to one which now includes energy as a factor of production. He went further to say that energy drives the work that converts raw materials into finished products in the manufacturing process.
Adeola (2017) submits that there is no doubt that looking at most economic development indicator, the over a century relationship between energy and Nigeria cannot be said to be a totally rosy one. It has been for the most part a troubled relationship with patches of happiness, but it is an “inseparable union”, that is solemnized on the famed injunction, “till death do us part”. Ayodele, (2004) echoed that electricity consumption is positively related to economic productivity and that the former is a cause factor of the latter. This means that electricity consumption have diverse impact in a range of socio economic activities and consequentially the living standards of Nigerians.
The essence of electricity in a nation is one so pertinent that generating sets is owned by most Nigerians. This shows that electricity is not only important for fuelling economic activities and productivity but it is also necessary for the attainment of sustained comfort. Sanchis (2007) added that increase in the electricity production will avoid the paralysation of the industrial production. Increased industrial production will eventually increase output. Thus, this implies that electricity production should become an economic policy high-priority objective which should be urgently responded to.
Energy efficiency is also called ‘efficient energy use’. It is not just about reducing utility bills of energy. It also involves boosting revenue through greater productivity. Energy efficiency is an indispensable component of any effort to improve electricity productivity. Ultimately, energy efficiency contributes to wealth, Oviemuno (2006). Energy efficiency provides another option for meeting air quality goals in that combustion volumes are reduced proportionately with fossil fuel consumption. Energy Efficiency refers to the improvement of products and practices that result in a reduction in the amount of energy necessary to provide energy services such as lighting, cooking, heating, cooling, transportation and manufacturing (Amaewhule, 2000). Classical economists did not recognize energy as a factor of production in the production process and neither did the Neo-classical. Today, economists like Alam (2006) found out in his work on ‘Economic Growth with Energy’ that not only does energy serve as a factor of production; it also acts as a booster to growth of a nation.
2.5 Proffer solutions to Bridge the Gap between Electricity supply and economic productivity in Nigeria
Over the years, series of remedial approaches have been postulated by scholars on how to solve the long suffering of electricity and other energy problems in Nigeria.
Adeola (2017) in his inaugural lecture delivered in University tagged on “Energy and Nigeria’s Economic Development: A Troubled but Indispensable Marriage” he recommended the following on resolution on electricity energy sector in Nigeria.
Public policy choices must prioritise investment over consumption, fuelling our economy first before producing oil and gas to grow other economies. Economic principles are most efficient in allocating scarce resources.
Appropriate pricing policy in the fuel and electricity subsectors will deliver an efficient sector that will attract private investment, signal real costs of production to consumers and save government billions of dollars that can be more efficiently utilized in other sectors.
There must be deliberate efforts to make the energy sector more transparent, accountable, and open efficiently. However, in the light of the performance of the sector post privatization in 2013, we need to revisit the privatization contract and make necessary adjustments to the responsibilities of all the stakeholders.
We must revisit the extant law in the sector, strengthen the regulator, the Nigerian Electricity Regulatory Commission (NERC), and utilize all our God given energy endowments, including solar, hydro, wind, biomass, etc. finally, more intellectual input in the formulation, monitoring and evaluation of government policies in the energy sector should be advocated.
Corroborating the above, Zekeri, Joseph and Anagba, (2018) suggest that for electricity supply to be adequately available for the citizens, the following should be observed:
One, the Federal Ministry of Power, Works and Housing should intensify effort in ensuring that the desired skill manpower is employed in the Nigerian power sector so as to help address the issue of quackery. This can be achieved when the National Power Sector Apprenticeship Scheme (NAPSAS) whose mandate is to provide adequate skill training for technical staff in the area of distribution sub-station operation, cable jointers, linesmen, pole climbers and electrical fitters is strengthening through funding and monitoring.
Similarly, firms operating in the Nigerian power sector should be encouraged to replace obsolete equipment and improve the quality of service delivery. Furthermore, the Nigerian Electricity Regulatory Commission (NERC), Nigerian Bulk Electricity Trading (NBET) and other relevant operators in the power sector should draft and implement a strategic framework that will help address the financial problem facing the power sector. This will in addition, regulate the actions of stakeholders of the Nigerian power sector from gross disrespect for the various financial and governance mechanisms that guild the market operation especially as regards to the tariff.
Finally, the federal government needs a strong political will to improve the generation capacity of power in Nigeria. Therefore, going by experts‟ projection, for Nigerian economy to grow, nation’s power output is expected to reach 50,000 megawatts by 2025 and by 2030 the expected projection should be 78,000 megawatts. Thus, the right time to put in place the right strategic frameworks and invest in the Nigerian power sector that will galvanize the desired growth in the Nigerian economy productivity is now.
2.6 Empirical Review of Related Studies
Scholars and researchers alike have conducted a number of studies to ascertain the relationship between electricity supply and a country’s economic growth and development. For instance, Ologundudu (2015) in his study investigated the causal and long-run relationship between electricity supply, industrialization and economic development in Nigeria between 1972 and 2010. The study revealed a unidirectional relationship without a feedback effect between labour and electricity supply. Similarly, Lionel, et al, (2013) in their study examined the relationship between electricity supply and economic development in Nigeria between 1970 and 2009. Their study shows that per capita GDP, lagged electricity supply, technology and capital are the significant variables that influence economic development in Nigeria.
Okafor (2008) in his study argued that despite huge funds the Nigerian government had invested in the power sector from 1999 to 2007. The country with the population of over 140 million was only able to generate less than 3,000 MW as against over 10,000 MW needed to transform the economy of the country. Okafor identified several causes of inadequate power supply in Nigeria and assert that the unpleasant situation has severe negative implications for the growth and development of the nation’s industrial sector as most organizations spent the large sum of money on running their private generator. He added that this unpleasant situation has brought a major setback on the country’s quest for industrial development.
Onakoya et al. (2013), in their study examining the relationship between energy consumption and Nigeria's economic growth between 1975 and 2010. Their study shows that in the long run, total energy consumption has a relationship with economic growth except for coal consumption. Also, their study shows that petroleum, electricity and the aggregate energy consumption have a positive relationship with economic growth in Nigeria. While Ado and Josiah (2015) in their study examined the impact of deficient electric power supply on the operations of small scale businesses operating in the northeast of Nigeria. Their study shows that the severity of electricity supply outages and the costs imposed by power supply outages on the operation of this class of businesses in the region. They suggested that there is the need for policy attention be focused on revitalizing the electricity sector of Nigeria which will in turn improve the national economy. Nwankwo and Njogo (2013) in her study examine the effect of electricity supply on economic development and likewise the effect of electricity supply on industrial development. The study shows that the electricity (ELEC), Gross fixed capital formation (GFCF), industrial production (INDU) variables and population have the positive relationship.
George and Oseni (2012) examine the relationship between electricity power and unemployment rates in Nigeria. They used the ordinary least square regression model examined the influence of electricity power outputs, supply, and consumption in addressing the high rate of unemployment in Nigeria. Their study covers the time frame between 1970 and 2005. Their study shows that the power supply to the industrial sector in Nigeria was lower than the supply for residential consumption. In their study, they discovered that the major cause of unemployment in Nigeria can be traced to the inadequate and unstable power supply to the industrial sector. Akpokerere and Ighoroje (2013) in their study examined the effect of government expenditure on economic growth in Nigeria using a disaggregated approach between1977 and 2009. Their study shows that Nigerian government total capital expenditure (TCAP), total recurrent expenditures (TREC), government expenditure on education (EDU) and power (POW) have the negative effect on economic growth. Uzochukwu and Nwogwugwu (2012) examined the federal government of Nigeria spending on the electricity sub-sector. The result of their study shows that despite the various reforms by past administrations and an increase in spending in the electricity sector, the electricity output is far from the realization of the reform objectives. Jesuovie et al. (2014) in their study find out whether the huge expenditure made yearly in the power sector has translated into greater electricity generation.
However, all the review study are relatively useful for this current study in the sense that they set way to the bottom of the problem the current study intend to examine. Thus, the current study aim to vindicate the weather there is significant relationship between energy (Electricity) supply and economic productivity in Nigeria; also, if there is no significant relationship, how can it be established are the major concern in this study.
CHAPTER THREE
METHODOLOGY
This chapter deals with the procedure used in carrying out this study. It includes research design, population, sample and sampling techniques, instrumentation, methods of data collection and the analytical tools employed in the study.
3.1 Research Design
Descriptive method of survey type will be employed in the study. The design will be attempted to examine on energy supply and productivity in Nigeria with a view to finding out if sources of energy have varying impact on economic growth in Oyo town, Oyo State. Thus, the researcher will try to gather data on the identified research problem without manipulating any of the variables in the study.
3.2 Population of the Study
The target population for this study comprise all community members in Oyo town, Oyo State.
3.3 Sample and Sampling Techniques
The study employed simple random sampling technique. Thus, sample for the study consist 60 community members within two Local Government areas in Oyo town, Oyo State. In each local government, 30 respondents will be randomly selected and the prepared questionnaire will be administered by the participants.
3.4 Research Instruments
The instrument that will be used for the study is “questionnaire”. The questionnaire will be designed and will be addressed by the target population to obtain the necessary information required in achieving the objectives of the study. The Questionnaire will be divided into two sections. Section ‘A’ provided Demographic Information of the respondents and partly explains how the questionnaire is to be filled, while section B focus on research questions and key for the responds are: Strongly Agree=SA, Agree=A, Strongly Disagree=SD and Disagree=D.
3.5 Validity of the Instruments
The instrument will be subjected to both face and content validity to ensure that they measured what they were expected to measure. Face validity entails looking at questionnaire and deciding if it really measures what it expected to measure. Content validity on the other hand, it has to do with the use of recognized subject matter experts to evaluate whether questionnaire assess defined content.
3.6 Reliability of the Instrument
Pilot test of the instrument will be carried out to observe how the respondents react to both questionnaires; whether the items are clear enough and easily understood, whether there is the need to include more items in certain areas, or whether there are some items to which they would not like to respond, etc. This will help determine the internal consistency and reliability of the questionnaires. A total of 5 community members will be randomly selected as a sample outside the area of study; copies of the instrument will be administered as a small, and the results will be analysed to determining the validity of the instrument.
3.7 Method of Data Collection
Permission will be sought from the local government and the participants will enlightened on how to attend to the Questionnaire, the participants thereafter will be asked to complete the questionnaire. Ethical issues of assurances will be given on the basis of confidentiality and discretion of the study. The participants will be informed of the purpose of the study and its seriousness and they will be encouraged to be truthful in their responses. The researcher administered the questionnaire with the assistance of one research assistant that assisted in the distribution and collection of the questionnaires.
3.8 Methods of Data Analysis
Data collected will be analysed with the use of chi-square structure tools for each of the items will be calculated and analysed based on respondents’ responses to each item.
CHAPTER FOUR
DATA ANALYSIS AND DISCUSSION OF FINDINGS
4.1 DEMOGRAPHICAL DATA
Table 4.1: Gender distribution of respondents
Gender Frequency Percentage
Male 29 48.3
Female 31 51.7
Total 60 100
From table 4.2 above, it could be inferred that majority of respondents were female with 51% in the scale.
Table 4.2: Age Distribution of Respondents
S/N Age Range Frequency Percent
1. 18 - 25 years 36 60
2. 26- 33 years 17 28.3
3. 34 and above 7 16.7
Total 60 100
From table 4.2 above, it could be inferred that majority of respondents were in range 18 – 25 years with 60% in the scale.
4.2 Data Presentation and Analysis of Research Questions
Table 4.3 Research Question 1: The relationship between energy (Electricity) supply and productivity in Nigerian economy
Items S A A S D D Total
There is significance relationship between energy (supply) and productivity in Nigeria economy 36
18
2 4
60
Electricity consumption assist in accelerating economic productivity 31
22
2
5
60
Location of industry depends on adequacy of electricity in place. 30
25
1
4
60
Stable power supply is germane in promoting the living standard as well as the economic activities of any nation. 33
24
2
1
60
Frequent electricity supply brings about development in environment, and developed environment brings about economic productivity. 32 23
1
4
60
Total 162 112 8 18 300
Group Size Degree of freedom 2
Cal 2
table
SA+A
SD+D 274
26 4 87.76 9.49
Significant at alpha value 0.05
The table above indicates that calculated value is 87.76 while the critical value on the chi-square table value at 4 degree of freedom at 0.05 level of significance is 9.49. It is obviously seen, that the calculated value is greater than the critical value, hence there is significant relationship between energy (Electricity) supply and productivity in Nigerian economy. This indicates that energy supply assist in development of Nigerian economy.
Table 4.4 Research Question 2: The challenges facing the relationship between energy (Electricity) supply and economic productivity in Nigeria
Items S A A S D D Total
Declination of industrial establishment. 43
15
1
1
60
High cost of production and services. 39
19
00 2
60
Closure of companies that were unable to afford alternative power 29
29
1
1
60
Technical losses in the system of production. 29
28
2
1
60
Poor electricity leads to high rate of unemployment 24
31
2
3
60
Total 164 122 6 8 300
Group Size Degree of freedom 2
cal 2
Table
SA+A 286 4 231.2 9.49
SD+D 14
Significant at alpha value 0.05
The table above indicates that calculated value is 231.2, while the critical value on the chi-square table value at 4 degree of freedom at 0.05 level of significance is 9.49. It is obviously seen, that the calculated value is greater than the critical value, hence there is significant challenges facing the between energy (Electricity) supply and economic productivity in Nigeria. This finding implies that the energy (Electricity) supply has affected economy productivity in Nigeria.
Table 4.5 Research Question 3: The proffer solutions to establish cordial relationship between energy (Electricity) supply and economic productivity in Nigeria
Items S A A S D D Total
Production of adequate electricity supply 42
13
5
00 60
Public policy choices must prioritise investment over consumption 31
24
2
3
60
firms operating in the Nigerian power sector should be encouraged to replace obsolete equipment and improve the quality of service delivery 30
25
4
1
60
There is need for deliberate efforts to make the energy sector more transparent, accountable, and open efficiently 32
25
2
1
60
Federal government needs a strong political will to improve the generation capacity of power in Nigeria 25
26
8
1
60
Total 160 113 21 6 300
Group Size Degree of freedom 2
cal 2
table
SA+A
SD+D 273
27 4 81.0 9.49
Significant at alpha 0.05
The table above indicates that calculated value is 81.0, while the critical value on the chi-square table value at 4 degree of freedom at 0.05 level of significance is 9.49. It is obviously seen, that the calculated value is greater than the critical value. Therefore, there is significant solution to establish cordial relationship between energy (Electricity) supply and economic productivity in Nigeria. This indicates that if good measures are put in place, that is if energy (Electricity) supply is adequately supply there will be development in economic productivity in Nigeria.
4.3 Analysis of Research Hypothesis
Table 4.6: Research Hypothesis 1: There is no significant relationship between energy (Electricity) supply and productivity in Nigerian economy.
Group Size Degree of freedom 2
Cal 2
table Remark
SA+A
SD+D 274
26 6 45.5 12.59 Reject null hypothesis
Significant at alpha value 0.05
The calculated value is 45.5 while the critical value on the chi-square table value at 6 degree of freedom at 0.05 level of significance is 9.49. It is clearly seen, that the calculated value is greater than the critical value, hence the null hypothesis (H0) is rejected while we accept the alternative hypothesis (Hi) that is, there is significant relationship between energy (Electricity) supply and productivity in Nigerian economy. This implies that energy (Electricity) supply plays a significant role in the development of economy productivity in Nigerian.
Table 4.9: Research Hypothesis 2: There is significant challenge facing energy (Electricity) supply and productivity in Nigerian economy.
Options Size Degree of freedom X2 cal X2 tab Remark
SA+A 286 1 0.45 3.84 Accepted
SD+D 14
Significant at alpha value 0.05
The calculated value is 0.45 while the critical value on the chi-square table value at one degree of freedom at 0.05 level of significance is 3.84. It is clearly seen, that the calculated value is less than the critical value, hence the null hypothesis (H0) is accepted while we reject the alternative hypothesis (Hi). That is, there is significant challenge facing energy (Electricity) supply and productivity in Nigerian economy. This result indicated that this challenge has affected development of economy productivity in Nigeria.
Table 4.9: Research Hypothesis 3: There is significant solution to establish cordial relationship between energy (Electricity) supply and economic productivity in Nigeria.
Group Size Degree of freedom X2 cal X2 tab Remark
SA+A
273 1 1.002 3.84 Accepted
SD+D 27
Significant at alpha value 0.05
The calculated value is 1.002 while the critical value on the chi-square table value at one degree of freedom at 0.05 level of significance is 3.84. It is clearly seen, that the calculated value is less than the critical value, hence the null hypothesis (H0) is accepted while we reject the alternative hypothesis (Hi). Therefore, it is evidence that there is significant solution to establish cordial relationship between energy (Electricity) supply and economic productivity in Nigeria. This result indicated that if the established solutions are put in place in energy supply, a great development shall reach economy productivity in Nigeria.
4.4 DISCUSSION OF FINDINGS
In this study attempt was made to examine the relationship between energy (Electricity) supply and productivity in Nigerian economy; challenge facing energy (Electricity) supply and productivity in Nigerian economy; as well as, solution to establish cordial relationship between energy (Electricity) supply and economic productivity in Nigeria. However, from the finding of the study it was revealed that there is significance relationship between energy (supply) and productivity in Nigeria economy in the sense that electricity consumption assist in accelerating economic productivity; stable power supply is germane in promoting the living standard as well as the economic activities of any nation and frequent electricity supply brings about development in environment, and developed environment brings about economic productivity. Furthermore, the finding revealed that challenges like: declination of industrial establishment; high cost of production and services; closure of companies that were unable to afford alternative power; technical losses in the system of production and unemployment have been facing economy production in the state due to poor electricity supply in the country. Finally, from the findings of the study it was revealed that certain measures like: Provision of adequate electricity supply; public policy choices must prioritise investment over consumption; firms operating in the Nigerian power sector should be encouraged to replace obsolete equipment and improve the quality of service delivery; deliberate efforts to make the energy sector more transparent, accountable, and open efficiently; and federal government needs a strong political will to improve the generation capacity for the betterment of the development in the economy productivity in the country.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
This chapter presents summary of the major findings, implications; it also puts forth the conclusion made based on the finding. Then, useful recommendations made in the study that is hoped that it will be implemented by the concerned personalities on energy supply and productivity in Nigeria economy.
5.1 Summary of the Study
The study focused on energy supply and productivity in Nigeria economy.
In this study all the necessary literatures have been reviewed, both conceptual and empirical studies respectively. The study was structured into five chapters. Chapter one gave the background to the study, statement of the problem, research questions significance of the study, scope of the study, and definition of terms were given within the chapter. Chapter two consisted of the review of the related literatures to the study. Chapter three gave the methodology used in study. The result and discussion of the findings from the analyzed data were presented in chapter four; this chapter is also made up of the description of the findings, the opinion of the respondents on the examined content.
In all, research questions and hypothesis were raised and analysed. From the results, it was revealed that there is significance relationship between energy (supply) and productivity in Nigeria economy because electricity consumption assist in accelerating economic productivity if there is stable power supply which is the germane in promoting the living standard as well as the economic activities of any nation and frequent electricity supply that brings about development in environment, and developed economic productivity. Furthermore, the finding revealed that challenges like: declination of industrial establishment; high cost of production and services; closure of companies that were unable to afford alternative power; technical losses in the system of production and unemployment have been facing economy productivity due to poor electricity supply in the country. Finally, from the findings of the study it was revealed that certain measures like: Provision of adequate electricity supply; public policy choices must prioritise investment over consumption; firms operating in the Nigerian power sector should be encouraged to replace obsolete equipment and improve the quality of service delivery; deliberate efforts to make the energy sector more transparent, accountable, and open efficiently; and federal government needs a strong political will to improve the generation capacity for the betterment of the development in the economy productivity in the country.
5.2 Conclusion
It is concluded that the relationship between energy consumption and economy productivity is important for all developing economies like Nigeria, most of which have experienced increasing level of government spending and have achieved low level of economic development overtime. In other words, issues pertaining to energy consumption and economic development should be given adequate attention especially in the budget schemes and because of this, substantial amount should be allocated to the power sector in order to resolve its challenges and keep the sector in good shape for it to make meaningful impact in economy productivity. This study concluded that Energy consumption has significant relationship with economic growth and productivity in Nigeria based on this study.
5.3 Recommendations
Based on the findings enumerated above, this study therefore, recommends that energy conservation policies should be effectively implemented without having any negative effect on economic growth in Nigeria and energy growth policy should be adopted in such a way that, growth and productivity in the energy sector stimulates economy productivity and thus expands employment opportunities in the country..
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