IMPACT OF OIL PRODUCTION AND ELECTRICITY CONSUMPTION ON WELFARE: EVIDENCE FROM NIGERIA

IMPACT OF OIL PRODUCTION AND ELECTRICITY CONSUMPTION ON WELFARE: EVIDENCE FROM NIGERIA

Author by Mrs. Iyabo Okedina

Journal/Publisher: Salem Journal Of Business & Economy

Volume/Edition: 6

Language: English

Pages: 25 - 38

Abstract

Understanding the relationship between oil production, electricity consumption and welfare of people has drawn the attention researchers since the welfare of a nation is of great importance and can be affected either positively or negatively by the impact of oil production and electricity consumption on growth and development. This paper examines the effects of oil production and electricity consumption on welfare using data for Nigeria. The Johansen cointegration framework was employed because the series were stationary after first differencing applying the AugmentedDickey Fuller and Phillip Perron tests. The Johansen cointegration results indicate the presence of long run relationship between oil production, electricity consumption and Human development Index -a proxy for welfare. The short run equation was estimated using the Error Correction Model having established the presence of a long run relationship. The Error Correction term is -0.31 and also statistically significant at a level of 5%. This significant error correction term reinforces the existence of cointegration as indicated by the Johansen Cointegration test. It also implies that 31 percent of the deviation from equilibrium is corrected yearly. The changes in oil production and electricity consumption have significant positive effects on the change in welfare in the short run. Findings from this empirical analysis indicate that government should encourage privatization of the existing refineries; establishing regulations that will promote investment in the Nigerian downstream oil sector and provide adequate security to curb diversion of the crude oil and pipeline vandalism. Government should also improve electricity generation from the diverse sources -Hydro-electric power, solar, wind, thermal and biogás.


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