IMPACT OF ENERGY CONSUMPTION ON ECONOMIC GROWTH AND ENVIRONMENTAL QUALITY IN NIGERIA

IMPACT OF ENERGY CONSUMPTION ON ECONOMIC GROWTH AND ENVIRONMENTAL QUALITY IN NIGERIA

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The study examines the impact of energy consumption on economic growth and environmental quality and also verifies the existence of the Environmental Kuznets Curve(EKC)hypothesis in Nigeria. The traditional production theory and Environmental Kuznets Curve (EKC) theory were used as the theoretical framework of the study and Autoregressive Distributed Lag (ARDL) approach constitute the empirical framework. Data from 1981-2015 wereutilised. The result of the first objective reveals evidence of inverse and significant impact of energy consumption on economic growth.The control variables of capital and trade openness show evidence of positive and significant impact on economic growth but labour reveals a negative and significant impact on economic growth. The study concluded that the negative impact of energy consumption and labour force on economic growth may not be unconnected with the inefficient nature of primary energy utilisation and the large unskilled labour force that dominate the production sector of the economy. The result of the second objective suggests that energy consumption has a negative and significant impact on environmental quality. As such, greater consumption of primary energy such as petroleum and natural gas reduce environmental quality. Moreover, the control variable of trade openness was found to improve environmental quality. Furthermore, the result of the third objectivedid not provide evidence of the existence of EKC hypothesis for Nigeria. Thiscould result from the fact that output level has not been expanded to a certain threshold beyond which additional expansion improves environmental quality.The study recommends apolicy that will enforce the efficient utilisation of primary energy in production and the implementation of environmental tax policy on related primary energy products to create awareness about environmental quality in Nigeria.

CHAPTER ONE

INTRODUCTION

1.1       Background of the Study

The nexus between energy consumption and income is widely discussed and debated since the

seminal work of Kraft and Kraft (1978). Energy consumption refers to the use of fossil fuel such

as petroleum and natural gas as input in the production process. Energy is considered to be the

lifeline of an economy, a vital instrument of economic growth and development and recognised

as one of the most important strategic commodities. Primary energy is not only essential for the

economic progress but its supply is uncertain due to the fact that the deposit of energy sources

are definite on the earth surface (Energy Commission of Nigeria, 2013).

In this era of globalisation, the dependency on energy and its increasing demand by countries

implies that energy will be one of the challenges in the globe in the next century (Saidi and

Hammami, 2015). In order to sustain the ability to increase the real output capacity of a country

from one year to another, energy is an important production requirement that has been ignored

by the traditional production theory (Ahmed and Azam, 2016).

In order to produce goods and services, the neoclassical traditional production theory

emphasisedon labour and capital. However, the use of capital such as machine requires the use of

fossil fuel energy. Thus, in co


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