Sustainable Power Supply and Economic Growth in Nigeria - Empirical Evidience

SUSTAINABLE POWER SUPPLY AND ECONOMIC GROWTH IN NIGERIA: Empirical Evidence
2011
SUSTAINBLE POWER SUPPLY AND ECONOMIC GROWTH IN NIGERIA: Empirical Evidence
Researcher: Nwafee Francis Ikechukwu
Supervisor: Dr Ugbor I. Kalu
FRANCIS IKECHUKWU NWAFEE
TITLE PAGE
BY
NWAFEE, FRANCIS IKECHUKWU 2007/149525
(Being a research project submitted to the Department of Economics, University of Nigeria, Nsukka, in partial fulfillment of the requirements for the award of a Bachelor of Science (B.Sc) Degree in Economics)
JULY, 2011.
Researcher: Nwafee Francis Ikechukwu Supervisor: Dr. Ugbor I. Kalu Page ii
Supervisor: Dr. Ugbor I. Kalu Page iii
DEDICATION
This work is dedicated to God Almighty for His faithfulness, grace and mercy in my life; and to the memory of my late sister, Mrs. Onuegbuna Elizabeth Chianumba (Igboago College).
Supervisor: Dr. Ugbor I. Kalu Page iv
ACKNOWLEDGEMENT
With deep sense of honor and gratitude, I humbly appreciate the Mighty God on whose mercy I rely for help, and who makes way in the wilderness of my life. I am indebted to my family, especially to my dear mother, Mrs. Caroline Okwuchukwu Igboanugo and my brother, Mr. Anthony Okafor Igboanugo for their relentless support throughout the period of my stay in the university. Also, invaluable support and contributions of the following people to this work cannot be thrown overboard. They include Dr. Ugbor I. Kalu, a dedicated simple man and my project supervisor, Prof. N. I. Ikpeze, a lively personality and excellent teacher, Rev. Fr. (Dr.) H. E. Ichoku, Dr. (Mrs.) G. Aneke, Prof. F. E. Onah, Dr. Moses Oduh, Mr. Emma Nwosu, Dr. E O. Onyukwu, Mr. Ezebuilo Ukwueze, Mr. Jude Chukwu and other lecturers in the Department of Economics. The following people are not left out in the vote of thanks; Mr. & Mrs. Emmanuel O. Maduagwuna (Ichie Eze di Ora Mma), Mr. Bernard Chidebe, Mr. Michael Ugwu (Ichie Ochiliozua), Ebeke Sixtus, Ozoemena Chinenye, Ebeke Beatrice, Ugwuoke Oliver, Kpadobi Nmachi Nwamaka, Aghadinauno Chinedu, Ejimofor Raphael, Ofodile Joseph, Okechukwu Nweke, Emmanuel Eboatu, Igboanugo Felicia, Mr. & Mrs. Tony Ozoffor, Mrs. Catherine Emoh, and Mr. & Mrs. Anekwe Onuorah. We appreciate you all.
Supervisor: Dr. Ugbor I. Kalu Page v
APPROVAL PAGE
This is to certify that this project has been red and approved as meeting the requirements of the Department of Economics, University of Nigeria, Nsukka, for the award of B.Sc Degree in Economics.
_____________________________ Dr. Ugbor I. Kalu (Project Supervisor)
__________________ Date
_____________________________ Prof. C. C. Agu (Head, Department of Economics)
__________________ Date
_____________________________ Prof. E. O. Ezeani (Dean, Faculty of the Social Sciences)
__________________ Date
_____________________________ External Examiner
__________________ Date
Supervisor: Dr. Ugbor I. Kalu Page vi
TABLE OF CONTENT
Title page Dedication
ii iv v vi vii
Acknowledgement Approval page
Table of Content Abstract
CHAPTER ONE Introduction
1 1 2 4 5 6 7 8
1.1.0: Background of the Study 1.2.0: Statement of the Problem 1.3.0: Objectives of the Study 1.4.0: Statement of Hypotheses 1.5.0: Significance of the Study 1.6.0: Scope of the Study
1.7.0: Definition of Basic Terms
CHAPTER TWO Literature Review
10 10
2.1.0: Conceptual Framework

Supervisor: Dr. Ugbor I. Kalu Page vii
2.2.0: Theoretical Framework
11 12 14 18 24 28 35
2.2.1: Structure of the Nigerian Electricity Industry 2.2.2: Perspectives on Nigerias Electricity Crisis 2.2.3: Reforms in the Power Sector 2.3.0: Empirical Framework
2.2.4: Power Supply and Nigerias Vision 20:2020
2.4.0: Limitations of Previous Studies
CHAPTER THREE Research Methodology 3.1.0: Introduction
39 39 39 40 40 40 41 41 42 44 44 47
3.2.0: Method of Estimation 3.3.0: Model Specification
3.3.1: Functional Specification of the Model
3.3.2: Mathematical Specification of the Model 3.3.3: Econometric Specification of the Model 3.4.0: Evaluation of Result 3.4.1: Economic Criterion 3.4.2: Statistical Criterion
3.4.3: Econometric Criterion 3.5.0: Source of Data
CHAPTER FOUR
Researcher: Nwafee Francis Ikechukwu Supervisor: Dr. Ugbor I. Kalu Page viii
Discussion of Research Findings 4.1.0: Presentation of Result
48 48 49 49 51 54 60 61
4.2.0: Evaluation of Regression Result 4.2.1: Economic Criterion 4.2.2: Statistical Criterion
4.2.3: Econometric Criterion
4.3.0: Evaluation of Research Hypotheses 4.4.0: Limitations of the Study
CHAPTER FIVE Summary, Policy Recommendation and Conclusion 5.1.0: Summary 5.3.0: Conclusion
63 63 64 66
5.2.0: Policy Recommendation
References Appendix
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ABSTRACT
This study investigated the challenges posed by inadequate and unreliable power (electricity) supply to economic growth and development in Nigeria. To guide the study, Ordinary Least Square (OLS) method of regression analysis was adopted using the Eviews 3.1 econometrics software. A time series data sourced form the National Bureau of Statistics (NBS), Central Bank of Nigeria (CBN), and Power Holding Company of Nigeria (PHCN), which covers between 1973 and 2009, was used for the analysis. The result revealed that electricity supply is positively related to, but with an infinitesimal or insignificant effect on economic growth in Nigeria; whereas there is high or significant demand for electricity in the country. Based on the findings of the study, it recommended that immediate step should be taken by the government to privatize and liberalize the poor public sector managed electricity industry in order to encourage competition and efficiency. It also recommended that a complete overhaul on existing facilities and new investment in capacity expansion be pursued in the areas of power generation, transmission, and distribution in order to attract high profile private investors who will be able to inject new blood into the industry; and that a regulatory agency be established to oversee the activities in the sector and forestall possible exploitation of consumers by profit driven actions of such private players.
Researcher: Nwafee Francis Ikechukwu Supervisor: Dr. Ugbor I. Kalu Page x
CHAPTER ONE INTRODUCTION
1.1.0:
BACKGROUND BACKGROUND OF THE STUDY Technological breakthrough in both basic and applied science,
mostly between 19th and 20th century has created a new world order where over 80% of mans activity and comfort now require direct or indirect use of electricity. According to Energy Commission of Nigeria (2003), electricity can be seen as a form of energy which enjoys considerable and diverse application because of its flexibility, ease of transmission and distribution. Electricity has assume dominant role in every economy among which include: the engine that powers production of goods and services; it facilitates use of technological devices; increases opportunity for investment in different lines of business; enhance agricultural development among others. Its availability reduces cost, increases output and makes production process easier and faster. The above roles have made electricity to be widely used among households, firms, government, agencies and organizations. Electricity is mainly used for lightening, cooking, powering of factory machines and other devices which are used for production and social welfare
services. Thus its usefulness has earned it a vital position among infrastructural needs of every society. Despite the above value and benefits of electricity, Nigeria does not have access to the supply of qualitative, reliable, and adequate electricity even after 100 years of experience. Her power stations remained in crisis situation, battling with inefficiencies in generation, transmission, distribution and sales of electricity, even when the country is in the midst of enormous primary energy potentials. Poor quality and inadequate electricity supply has affected Nigerias economic performance in no small measure. Its effect on the economy will help us to appreciate the uniqueness, usefulness, and irreplaceable status of electricity among other infrastructures. Most importantly, poor quality electricity has retarded agricultural growth and development. It has undermined
competitiveness in industrial sector and influence performance in other sectors of the economy as a result of its multi linkages. To remedy this effect the Federal Government was brought in contact with serious reforms to enhance adequacy, sustenance, efficiency and profitability in the power sector.
1.2.0: 1.2.0:
STATEMENT OF THE PROBLEM It is unarguable that power supply crisis in Nigeria significantly
undermines
the
effort
to
achieve
sustained
economic
growth,
Supervisor: Dr. Ugbor I. Kalu Page 2
competitiveness
in
regional
and
global
markets,
employment
generation, and poverty alleviation. Iwayemi (2008) contends that the prolonged dismal electricity industry performance has been the most intractable infrastructural problem and policy challenge that the nation has lived with in the past 50 years of independence. It is not only worrisome that about 90% of Nigerians cannot boast of 16 hours of electricity supply per day (Okonkwo, 2010), rather it is most challenging that the nation has experienced mass exodus and closure of manufacturing firms because of the electricity failure that has plague the nation over the years. Hence remaining firms are forced to produce under very high cost of alternative power supply, which often translate into high cost of consumer and industrial goods, excess inflation and unemployment. In general, cardinal challenges of inadequate power supply in Nigeria include insufficient power generation, high generation losses, low transmission voltage and transmission losses, distribution losses underutilization of installed capacity resulting from shortage of gas supply and
hydraulicity phenomenon, that is, seasonal water
fluctuations in the hydro power stations and as well overstress of actual generated electricity, which leads to frequent breakdown in the electricity grid. It also included underutilization of primary energy potentials; poor investment and maintenance regime, widespread corruption in form of
Researcher: Nwafee Francis Ikechukwu Supervisor: Dr. Ugbor I. Kalu Page 3
embezzlement of injected project fund and misallocation of resources. High indebtedness to PHCN, vandalism of PHCNs property, electricity theft, and inconsistency in planning, poor technical and institutional framework and poor human capital development are also among the challenges in the sector. In view of the above stated problems, we shall seek answer to the following research questions: i. Does unreliable and inadequate electricity supply affect economic growth in Nigeria? ii. Does electricity consumption influence economic growth in Nigeria? iii. Is the domestic investment level sufficient for economic growth in Nigeria? The answer to above questions shall guide our recommendations as regards the nature and scope of reforms required in the power sector.
1.3.0:
OBJECTIVES OF THE STUDY The over-riding focus of this research undertaking is to carefully
analyze the importance of sustainable electricity supply for economic growth, using empirical evidence from Nigeria as our reference point. We shall also exert more energy on the nature and magnitude of major challenges facing Nigeria power sector in the supply of adequate and
sustainable electricity. We shall also proffer an optimum and most economic solution to the existing problems. However, in adhering to the quantitative nature of studies of this kind, the objectives of this enquire shall be explicitly define in terms of the areas the scope of the study will cover. They shall include; 1 To examine the effect of unreliable and inadequate electricity supply on economic growth in Nigeria. 2 To ascertain the influence of electricity consumption on economic growth. 3 To investigate the influence of domestic investment on economic growth in Nigeria.
1.4.0:
STATEMENT OF HYPOTHESIS In attempt to properly accomplish the above stated objectives,
this study shall be firmly guided by these hypotheses. But we shall for ease of analysis partition our testable hypothesis into three cases. H0: Total electricity supply is insignificant for economic growth in Nigeria. H0: Total electricity consumption does not contribute to economic growth in Nigeria. H0: Domestic investment level does not influence economic growth in Nigeria.
1.5.0:
SIGNIFICANCE OF THE STUDY Economically speaking, the rate at which electricity crisis has
constrained the enormous potentials within Nigeria cannot be easily quantified. The overwhelming need for uninterrupted and sustainable electricity supply for both economic and social use, and as well, for maintenance of comfortable living shall make this research
undertaking of great importance to various levels of government in Nigeria and as well the entire populace. In more specific terms, this study shall be of particular importance to the following class of people
i. Policy makers and energy experts: From the findings of this study
they would be presented with the right policy inputs to revive the sector.
ii. Government and Investors: Outcome of this research shall include

unveiling root causes of the crisis in the sector. Thus, the available information shall in no small way assist both players in taking right steps require to escape the crisis and provide insight for better future performance.
iii. Business firms, Institutions and Households: These entities shall

also benefit from this study. It will offer them useful insights on how to minimize energy cost while maximizing outputs and utility.
iv. Future Researchers: They would be served a veritable footing to

embark on other areas, which they felt are not covered in this study.
1.6.0:
SCOPE OF THE STUDY This research work shall place more emphasis on nature and
magnitude of the effect of unreliable and inadequate electricity supply as it relates economic growth in Nigeria. This implies that the study shall dwell more on the supply side than on the demand side of electricity. Above this step, we shall review the reforms in the sector and as well assess the level of performance of such reforms. The study shall also enquire into possible causes of poor quality electricity supply, underutilization of primary energy potentials in electricity generation, and the effect of state monopoly in the sector. Although the study shall highlight the origin of electricity industry in Nigeria, we shall focus on the activities of National Electric Power Authority (NEPA) and its successor, the Power Holding Company of Nigeria (PHCN) between 1973 and 2009. Our efforts shall revolve around the strengths and weaknesses of the above name utility companies in the supply of electricity in Nigeria.
1.7.0:
DEFINITION OF BASIC TERMS
a) Sustainable Power Supply: Sustainability is a recent concept that

originated at the 1980 world conservation strategy of the International Union for the Conservation of Nature and National Resources (IUCN), where it was argue that sustainability is a strategic concept involving the lasting utilization of national resources, the preservation of genetic diversity and the maintenance of ecosystem (Smith, 1993). However, sustainable power (electricity) supply can be defined as that which meets the need of the present without compromising the ability of future generations to meet their needs. It has to do with power supply that will be maintained or support itself in the future without giving rise to factors that will prevent or undermine its performance.
b) Economic growth: This has to do with increase in economic or

profit-driven legal activities leading to increased income, provision of more work, generation of more income, and increased material wellbeing. Economic growth include those factors that bring about wealth creation at the individual, community, and national levels; allowing people to raise their standards of living; and potentially strengthen such individuals, communities or nations.
c)
Empirical Evidence: By empirical evidence we mean proven or
confirmed testimonies, facts or indications about what took place in the past, and which can be verified. Empirical evidence in this context
involves using of traceable facts in analyzing performance of the electricity sector in Nigeria while sourcing for optimum solution to the problems and challenges of the sector at the same time.
CHAPTER TWO LITERATURE REVIEW
2.1.0:
CONCEPTUAL FRAMEWORK By its nature and ease of conversion, electricity stands to be
recognized as the highest alternative used resources. This was made possible by trend of technological innovation, where most products are develop to use electricity in one form or another. Indeed power sector has become very strategic given the prominent role of electricity in powering economic growth in every economy. Although electricity has become indispensable for a meaningful economic and non-economic welfare, its supply remain infinitesimally low and of poor quality in Nigeria. The power sectors inability to generate electricity need of the nation has degenerated into what is known as power supply crisis. Apart from underutilization of installed capacity, the crisis was marked by poor infrastructural maintenance, low investment in new projects, and inadequate supply of energy need (especially gas) of the sector. Effect of the crisis can also be measured in terms of non competitiveness in the industrial sector, non mechanization of the agricultural sector and non expansion of Small and Medium Scale Enterprises (SMEs). The experience of constant power failure in the face of increasing demand for electricity has been identified as the
cause of high suppressed demand for national grid electricity in the country. Firms and households instead depend more on self-generated electricity, which was estimated at about 100% or above of the national grid electricity. Consequently, high cost of locally made goods, limited investment opportunity, rising unemployment and environmental pollution become the other of the day. But the pertinent question is what can the government do to save the power sector from total collapse? For some, it is privatization of electricity market, while for others, funding and investment should be increased while state monopoly structure in the sector be retain. These views dominated the argument for the solution to power failure in Nigeria.
2.2.0:
THEORETICAL FRAMEWORK Though Nigeria is highly endowed in natural, human, and energy
potentials; her electricity market remains highly underdeveloped. Thus one of the biggest challenges facing her economic growth and welfare is unavailability of adequate and sustainable electricity supply. The countrys poor record of national savings and capital accumulation has been responsible for low investment in the sector. According to Todaro and Smith (2009), every economy must save a certain proportion of its national income, if only to replace worn-out
or impaired capital goods. They argue that new investments representing net additions to the capital stock are necessary if we assume that some direct economic link between the total size of capital stock and total GDP exist. Thus narrowing down this argument to the context of Nigeria power sector where under-investment, technical and institutional inefficiencies is the tradition; one will see why the sector records poor performance. The principal logic behind Harrod-Domar Economic Growth Theory found in Todaro and Smith above is that the rate of growth of GDP is said to be jointly determine by the net national savings ratio and the national output ratio. Having stated that constant electricity supply is positively related to economic activities, which in turn increases the GDP; it also follows that underinvestment in the power sector can seriously undermine economic growth.
2.2.1:
Structure of the Nigerian Electricity Market. Electricity market in Nigeria was developed in late 19th century.
In Sambo (2008); Babatunde and Shuaibu (2009); Isola (2010); Falosey (2011), attempt at electricity generation in Nigeria started in 1896
when electricity was first produced in Lagos, fifteen years after its introduction in England.
This electricity was trusted to the care of Public Works Department (PWD) until 1929 when Nigeria Electricity Supply Company (NESCO) was establish immediately after the construction of Kurra hydroelectric power station near Jos. In 1951 a central body known as Electricity Corporation of Nigeria was established by the Legislature Council. This follows construction of the first 132kV line in 1962, which link Ijora power station and Ibadan power station. After this, the Niger Dams Authority (NDA) was established in 1962, and mandated to develop hydropower potentials of the country. But the government however in 1972 merged the two authorities namely, ECN and NDA to form the National Electric Power Authority (NEPA). NEPA was made a state monopoly in the power sector and was also charged with development and maintenance of an efficient coordinate and economical system of electricity supply for all parts of the country. This structure remains until March 2005 when the Electric Power Sector Reform bill was passed into law. The EPSRA 2005 unbundled NEPA into 18 companies in preparation for its privatization. It equally created a holding company known as Power Holding Company of Nigeria (PHCN) to oversee generation, transmission, distribution, sales of electricity and general management of the utility company (NEPA) until the newly created companies are privatized.
In
defense
of
state
monopoly
in
Nigeria
power
sector,
Koutsoyiannis (1998) and Varian (2006) contend that state monopoly is the most suitable market structure for an establishment of highly capital intensive nature (especially in production of essential goods). According to their argument, a state monopoly will ensure more protection of the masses against private sector exploitation and guarantee adequate provision of such commodity, even in the presence of a zero economic profit. This theory supported government domination in Nigeria power sector given the importance of electricity in economic life of the nation. However, in Subair and Oke (2008), the justification for state monopoly in the sector was disqualified on the ground of inherent inefficiencies associated with monopoly market. They maintain that poor performance and crisis in the power sector was embedded in the weaknesses of a monopolist which include misallocation of resources.
2.2.2:
Perspectives on Nigerias Electricity Crisis Poor performance of the electricity sector has been a recurrent
decimal in Nigeria. Various studies show that required electricity supply for a meaningful economic growth is still lacking in he country, even though she has one of the highest energy potentials in the world as contain in table 2.1
Table 2.1: Energy Resources in Nigeria

Energy Type Crude Oil Natural gas Coal Hydro Solar radiation Wind energy Biomass Wave and tidal energy Source: Akin Iwayemi (2008) Reserves Estimates 36 billion barrels 185 trillion cubic feet 2.75 billion metric tones 14, 750 MW 3.5-7.0 kwh/m2-day 2.0-4.0 m/s 144 million tons/year 150,000 TJ (c16.6x106 toe/yr
In its assessment of the power sectors performance, the Presidential Task Force on Power (PTFP) maintains that Nigeria records biggest gap between electricity supply and demand. After the evidence which shows that out of 8,000MW installed capacity only 3,800MW was generated electricity for more than 150 million populations. The Task Force however contends that for the nation to pull out of its electricity gap she must have to engage in meaningful investment in power generation, transmission and distribution (Salau, 2011). Further emphasis was laid on inability of the federal Government dominant role in procurement, construction, operation and
maintenance in the sector to provide the nation with adequate electricity supply. In National Economic Empowerment and Development Strategy (NEEDS, 2004), an independent private sector model was projected as a better alternative to state monopoly in Nigeria power sector. The publication criticized the state monopoly on the ground of inefficiency as follows; No new power stations were built between 1990 and 1999 No major overhaul of plants was carried out between 1990 and 1999 Only 19 out of 79 generating units were in operation in 1999. Actual daily generation fell to less than 2000MW in 1999 No transmission lines have been built since 1987. Federal Government funding to the sector decreased continually between 1980 and 2000. Similarly in his view, Okonkwo (2010) conceptualized the crisis from perspective of inadequate supply of gas to the thermal power plants. He insisted that constant harassment of oil workers by the Niger Delta militants and high rate of gas flaring by the oil companies are responsible for acute shortage of gas supply to the power stations in Nigeria.
Okonkwo also included the effect of global warming which causes low water levels and undermine generation of electricity at hydropower stations especially in dry season. Another model of consideration that explains the performance in Nigeria power sector is the concept of technological constraints on
firms, using the Cobb-Douglas production function stated as; Y = AKL----------------- 1

Where Y is the output level, A is the parameter measuring level of technology, k is the capital input, L is labour input and , are
parameters that measure rate of combination of factor inputs (K and L) respectively. According to Varian (2006), only certain combinations of inputs are feasible ways to produce a given amount of output; and the firm must limit it to technologically feasible production plans. This implies that the level of output (Y) is influenced by technological coefficient (A) given certain level of capital (k) and labour (L). But empirical evidence reveals that both obsolete technology and inadequacy of modern technical skill is paramount in the sector. Thus, leading to low utilization of installed capacity of the power plants [estimated at about 26.7% in 2009 by CBN (2010)] and low energy mix in electricity generation. Ayodele (2001) shows that only 36% of primary energy resources are being utilize in electricity generation in Nigeria. He stressed that out of coal and lignite, natural gas, crude oil, solar, hydro, nuclear, wood fuel,
geothermal, tide, biogas and biomass; only four sources (coal, crude oil, natural gas and hydro) are currently being utilized. Institutional weakness is yet another factor in the electricity crisis. Adoghe (2010) define this weakness to include poor tariff regime, poor planning and coordination, low managerial skill and governance failure, and lack of innovative spirit which is inherent in the stateowned power sector. Lastly, corruption in the polity was pointed out among factors responsible for under-performance in the sector. It has been argued by Okonkwo (2010) that high profile inducement in appointment of key personnel in the sector is responsible for the gross mismanagement and embezzlement of funds allocated to the sector over the years. This argument arose from the insignificant effect of the injected US$ 13.5 billion in the sector by Obasanjos government between 2000 and 2007. The fund was estimated to be sufficient to assist the sector in generation about 10,000MW of electricity by 2007, but it ended up generating only about 4,000 MW.
2.2.3:
Reforms in the Power Sector. Most countries in Africa, Latin America, Asia and European
Union have embarked on extensive power sector reforms. In all these countries electricity supply is now no longer the statuary monopoly of
the state-owned public utilities, Independent Power Producers (IPPs) have already made their powerful appearance. Power Ministries have been converted into corporations, and
liberalization has gathered momentum across the US, Ireland, Sweden, Norway, and New Zealand, except in France where the Electrcite de
France (EDF) retain state monopoly with optimal performance

(Vijayamohanan, 2008). Further more, Bacon (1995) opine that power sector reform should reflect developmental stage of the country in question. That is, whether the reform should embrace privatization and liberalization, or whether it should entrench state monopoly by making it more economical and efficient should be determined by whether the country is a developed or developing country. He cited example of large countries like China and small countries like Bolivia which have adopted power sector reform models according to their own needs and circumstances. In Nigeria in particular, NEPA has remain a state owned public utility from its establishment in 1972 until 2005 when the Electric Power Sector Reform Act was introduced. Although the company was once commercialized which supported upward review of tariffs in 1988 following the implementation of 1986 structural Adjustment
Programme, the sector remain unable to meet electricity demand of the nation.
Hence the Federal Government of Nigeria in her current reform agenda according to Faloseyi (2011) estimated an investment worth of N1.5 trillion over few years to ensure adequate and reliable electricity supply from the sector. Available literature has revealed two principal reasons that made power sector reform a necessary condition in the provision of sustainable electricity supply in Nigeria, and they include: a) The poor performance of the state-owned utility company in terms of high cost, inadequate expansion of access to electricity services for the population and/or unreliable supply. b) The inability of the sector to finance the needed expenditure on new investment. This reform was set to meet the following goals and objectives as it was contain in the National Electric Power Policy (NEPP) as follows: (i) Improve the efficiency and affordability of the power supply. (ii) (iii) (iii) Encourage private sector participation and competition. Attract investment. Establish an independent regulatory agency to ensure level playing field for all market participants. (iv) Provide an enabling environment for long term
development of the sector. (v) To ensure minimum adverse environmental impact and
(vi)
To ensure a leadership role for Nigeria in the development of the proposed West African Power Pool (WAPP).
In an effort to achieve the above objectives, the EPSRA 2005 adopted wholesome competitive model as opposed to the single buyer model or retail competition. In this arrangement, distribution companies should buy power directly from the generators; and the transmission company will remain a pure electricity transport and dispatch company. In Isola (2010), it was stressed that the adopted competitive model in the sectors operation was linked to the provision of the Act which unbundled NEPA into 18 different companies. The company will be made up of 6 Generators, 11 Distributors and 1 Transmission Company. According to the Electricity Power Sector Reform Act (2005), the reform will be carried out in three phases as follows;
Phase 1: A 100% state-owned PHCN was created and vested with the
assets and liabilities of the defunct NEPA. This company co-exists with the IPPs of which NEPA has signed power purchase agreement. The National Electricity Regulatory Commission (NERC) was also created in this stage as an independent and self-funding sector regulator. Ikeonu (2006) listed the statutory obligation of the commission as follows:
Ensure orderly development of a competitive power market Ensure efficient safe and adequate production of electricity. Promote competitive and private sector participation. Protect consumers and the public interest. Evolve standard and codes that measure with international best practice. Evolve stable and equitable rates thereby ensuring reasonable profit. License and regulate persons engaged in electricity business. Settle disputes amongst industry participants. Ensure expansion of access to rural and urban dwellers. Establish and administer the power consumer Assistance Fund for subsidizing under-privileged consumers. Again successor companies are also incorporated in this phase for the purpose of assuming the assets and liabilities of the PHCN. They are empowered to carry out functions relating to generation transmission, trading, distribution and bulk supply as well as resale of electricity. To ensure a smooth transition to a private sector led market, the Federal Government will initially hold the shares in the successor companies until they would be gradually privatized.
A special purpose entity would also be created for the purpose of procuring electricity from successor generators and distributors as well as the IPPs.
Phase 2 (Medium term): Privatization of the successor generation

and distribution companies would have been completed while the successor transmission/dispatch company would be left under
government control. This phase shall be characterized by competition among generators; by energy trading between generators and distributors, primarily on the basis of bilateral contracts.
Phase 3 (Long-term): This involves the establishment of a wholly

competitive market characterized by economic pricing of electricity that would allow for recovering of full cost of supplied electricity. Another key provision under the reform was the creation of Rural Electrification Agency (REA) and Rural Electrification Fund. Ojukwu (2008) upheld the view that REA and its supporting fund were established to increase access to rural area; and to make available reliable electricity to at least 75% of Nigerians by 2020. He equally summarized the essence of the reform as effort to provide effective and efficient power supply that is affordable but at the same time cost reflective. But for Vijayamohanan (2008), a developing country like Nigeria should not embrace total privatization and liberalization of its power sector for two main reasons:
First, there is high tendency of running into the abuse of private monopoly due to the inherent strong profit motive of the private sectors. He argue that since electricity cannot be readily stored, but must be supplied continually in adjustment with varying demand, it is technically required that power sector is to be a vertically integrated natural monopoly capable of supplying electrical energy as
economically as possible, and with a high degree of quality and reliability. Second, leaving such an important public utility to the vagaries of profit-controlled market forces will exclude the under-privileged populace from benefits of electricity. Thus it will lead to unbalanced economic growth, inequality and perpetuate poverty in the system.
2.2.4:
Power Supply and Nigerias Vision 20:2020
Vision 20:2020 is all about Nigerias dream of becoming one of the 20 largest economics in the world by the year 2020. This dream was anchored on the nations long-term development plan which was designed to stimulate rate of economic growth and development endowment. Argument from different authors seems to converge at a particular point. Predominantly, there is a view that Nigeria is less
through
increase
in
utilization
of
her
resource
likely to actualize the nine-years-away dream, given her critical infrastructural deficit which cannot stimulate required consistent high economic growth rate. While analyzing poor electricity supply as a major constrain to economic performance in Nigeria some analysts for instance Iwayemi (1991); Adegoke (1991); Ayodele (1992) and (1998) explain neglect of the power sector in 1990s as the period of serious electricity crisis; a crucial or decisive moment; an undesirable turning point; a time of difficulty and distress; a state of confusion when things no longer happen in the normal or usual manner. But the question is whether the power sector, given the level of resources at its disposal can supply about extra 45,000MW of electricity within the next 9 years to meet electricity need of the nation by 2020. To answer the above question, we shall borrow from economic theory of the
Neoclassical
Counterrevolution,
using
Market
Fundamentalism approach as it is contain in Todaro and Smith (2009).

In a developing country like Nigeria, the theory favoured supplyside macroeconomic policies. It called for free markets and the dismantling of public ownership, static planning and government regulation of economic activities. The central argument of the neoclassical counterrevolution is that underdevelopment results from poor resource allocation due to incorrect pricing policies and too much state intervention by overly active developing nation governments.
Hence the neolibrals contend that by permitting competitive free markets to flourish, privatizing state-owned enterprises, promoting free trade and export expansion, welcoming investors from developed countries and eliminating the plethora of government regulation and price distortions in factor, product and financial markets; both economic efficiency and economic growth will be stimulated. Thus predominant state monopoly in NEPA/PHCN; excessive
government regulation with respect to conduct; under-investment; and static planning strategy accounts for poor resource allocation, which yield poor quantitative and qualitative performance in the sector. Again, since the actualization of vision 20:2020 is intricately interwoven with the provision of sustainable electricity supply, it thus suggest that a good number of internal and external factors should be considered while making reforms that will bring sustainability in the sector. In his definition of quality kilowatts or sustainable electricity provision, Wilde-Ramsing (2009) insist that it involves that which generate,
transmit, distribute and supply electricity in a manner that contributes to poverty reduction and satisfaction of basic needs without damaging the natural environment or compromising the future generations ability to meet their own need. The strategic role of electricity calls for critical consideration of social, environmental and economic issues surrounding the economy while
planning for sustainability. This will ensure peaceful coexistence among the product (electricity), users and the environment. A look at figure 2.1 below will help us appreciate the factors that should go in while planning for a sustainable electricity supply. Fig 2.1: Sustainable electricity model
Critical issues for sustainable electricity provision
Social issues
Environmental issues
Economic Issues
Displacement
Community life style impact Consumer rights
Natural resource depletion Renewable source of energy for electricity
Indigenous rights
Climate change and Green House Gas emission
Local economic development
Competition
Reliability of supply
Corruption
Affordability Access to electricity Public health and safety Labour Issues
Waste and pollution
Economic efficiency
Due diligence
Bio-diversity Gender equality
Ecosystem impact
Research and Development
Demand-side initiative
The sustainable development balance: Cross-cutting issues
Production chain responsibility
Poverty reduction and meeting basic needs
Respect for human rights
Transparency and provision of information
Precautionary principles and evaluation of risks and alternatives
Stakeholder engagement and public participation in decision making
Source: SINTEF Energy Research and ProSus,
Attempt to analyze Nigeria power sector in the context of above diagram suggest that poor performance in the power sector was resulted from inability of the planners to inculcate issues like community lifestyle, affordability, public safety, renewable energy source, waste and pollution, competition among others in the development of her power sector. While a wider approach is being taken in planning for a sustainable reform, the government is expected to accelerate its effort in introducing full-time private sector leadership in the sector so as to keep the visions hope alive.
2.3.0:
EMPIRICAL FRAMEWORK From our theoretical argument above, we have been able to
establish that; a) State monopoly power of NEPA and PHCN was the source of inefficient resource allocation and mismanagement in the sector. b) Demand and supply gap in the sector was primarily caused by underinvestment which emanated from poor national savings culture. c) Dismantling of public ownership in favour of freer market structure will revive and boost performance in the sector. Some researchers examined the problem of power failure using quite a number of approaches such as self-assessment, economic welfare
analysis, market structure approach, production function and cointegration test approach. Their application in both developed and developing economics show their strengths and weaknesses alike. On its assessment of impact of inadequate power supply on economic growth, the Central Bank of Nigeria (2000) concisely enumerated the following problems of Nigerian power sector as follows; (i) Lack of preventive and routine maintenance of NEPAS facilities which results in huge energy losses. (ii) Frequent major breakdowns, arising from the use of outdated and heavily over loaded equipment. (iii) Lack of coordination between town planning authorities and NEPA, resulting in poor overall power system planning and over-loading of NEPA equipment. (iv) Inadequate generation due to operational/technical problems arising from machine breakdown, low gas pressure and low water levels. (v) (vi) Poor funding of the organization. Inadequate budgetary provision and undue delay in release of funds to NEPA. (vii) NEPAs inefficient billing and collection system. (viii) High indebtedness to NEPA by both public and private consumers who are reluctant to pay for electricity consumed as and when due.
(ix)
Vandalization and pilferation of NEPAs equipment.
The fact that Nigeria has poor national savings record, which often undermines investment ability, helps to explain the existence of above mention problems in her power sector. For instance the CBN (2009) gave national savings as percentage of GDP in Nigeria for 1984, 2001, 2003, and 2005 as 10.8%, 1.8%, 1.4% and 0.5% respectively. It shows a continuous decline in the nations Marginal Prosperity to
Save (MPS) over the listed years.

Apart from relatively low installed generation capacity of about 8,469.5 MW which was expected to satisfy electricity needs of 150 million people in 2009, average utilization capacity remain 26.7% (CBN, 2010). This implies average supply of 2257.6 MW of electricity as against estimated demand of about 14,066 MW for the year. Though actual demand for the national grid electricity stood at 2060.71 MW, about 12,005.29 MW represented suppressed demand which is likely to be provided through self-powered generators. Thus, this revealed the dichotomy between electricity supply and its demand in the country. Table 2.2 below will present us with facts on installed generation capacity of the power plants, total generated electricity, actual electricity consumed percentage losses from generated electricity,
ownership position of power plants, and consumption categories between 1999 and 2009. Table 2.2: Power Sector Performance (1999(1999-2009)
Year Total install generation capacity (MW) Total generated electricity (MW) Actual electricity consumption (million of kwh) % loss of generated electricity % of production % of consumption category
Commercial/
Residential
NEPA 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 5.876 5.981.6 6251.6 6.180 6.130 6.130 6.777.6 6.999.5 8,233.5 8,233.5 8,469.5 1,596.2 1,531.2 1,801 2,145.5 2,018.3 2,762.3 2,687.1 2,636.4 2,623.3 2,403.2 2,257.6 867.1 811.5 889.4 1,2841 1,286.7 1,917.8 1,973.1 2,389.2 2,245.5 2.108 2,060.7 45.7 47.0 50.6 40.1 36.3 30.6 26.8 9.1 14.4 12.9 8.8 99.5 99.5 99.5 99.5 99.5 99.5 99.5 85.3 85.3 85.3 87.2
IPPs 0.5 0.5 0.5 0.5 0.5 0.5 0.5 14.7 14.7 14.7 12.8 51.5 51.4 52 59.6 59.6 51.4 51.4 51.3 51.3 55.3 56.3 26.8 26.4 26.2 27.5 27.5 26.4 26.4 26.6 26.7 26.7 26.7 21.7 22.2 21.8 12.9 12.9 22.2 22.2 22.1 22.0 20.0 18.0
Sources: CBN: Annual Report and Statement of Account several years. NBS: National Statistic Fact Sheet, 2000. NEPA: National Electric Power Authority, 2000.
Although electricity generation losses has reduced significantly from what it used to be before the inception of the Fourth Republic, the case of underutilization of installed capacity remained a critical challenge in
Industries
the sector. Empirical investigations show that the power sector was at the brink of total collapse before the intervention of the Obasanjos government. Barros, Ibiwoye and Managi (2011) recorded that previous effort of past governments to restore life in the sector yielded little or no result. Even though the government introduced a reform which will ensure possible shift in paradigm as regards effective performance in the sector, it still lives below its words with respect to policy implementation. A practical illustration of this weakness was found in several unfulfilled promise of constant power supply to the nation. It once promised increasing operable power generation to 6,000 MW by the end of 2009, which will further be increase to 10,000 MW by the end of 2011 (African Development Bank Group, 2009) . Yet operable power generation is below 6,000 MW as at April 2011. As a matter of fact, the real cost of constant electricity failure in Nigeria cannot be easily estimated. For instance in 2010 annual budget estimate, the sum of N3,829,539,696 was projected for expenditure on purchase of generators, maintenance and fueling in federal parastatals alone. Recently, the acting Director General of the Bureau of Public Enterprises (BPE), Ms Bolanle Onagoruwa reveal that the bureau has not received the go-ahead order from Federal Government to commence
privatization of the 18 companies created from NEPA by EPSRA 2005 (see Daily Punch, Tuesday, 15 March 2010). If we should go by the reference growth scenario in tables 2.3 and 2.4 below, it will be easily established ceteris Paribus that current propensity of governments effort in the power sector reform can meet the nations electricity need only in the long-run.
Table 2.3: Electricity Demand Projections per Scenario MW

Scenario Reference (7%) High Growth (10%) Optimistic I (11.5%) 2005 5,746 5,746 5,746 2010 15,730 15,920 16,000 2015 28,360 30,210 31,240 64,200 2020 50,820 58,180 70,760 107,600 2025 77,450 107,220 137.370 172,900 2030 119,200 192,000 250,000 297,000
Optimistic II 5,746 33,250 (13%) Source: A. S. Sambo, 2008
Table 2.4: Electricity Supply Projections per Scenario MW

Scenario Reference (7%) High Growth (10%) 2005 6,440 6,440 2010 15,668 15,861 15,998 2015 28,356 30,531 31,235 2020 50,817 54,275 71,964 2025 77,450 107,217 177,371 2030 136,879 192,079 276,229
Optimistic I 6,440 (11.5%) Source: A. S. Sambo, 2008
Poor attitude to effective power sector reform can be seen as what clearly defined Nigerias usual poor ranking in several years report of the World Economic Forum. The 2010 report of the forum reveal that Nigeria is the 32nd largest economy with nominal GDP value of US$ 341 billion in 2009, but she was ranked 138th in quality of electricity supply out of 139 countries in the survey. Among other factors that explain power sector failure in Nigeria includes union opposition (power sector staff) to proposals of the 2005 EPSRA. Babatunde and Shuabu (2009) maintain that such opposition affected the procurement and effective utilization of the World Banks US$ 100million assistance offer in February 2005 which was intended to enhance NEPAS privatization policy. In the face of this challenges however, there is a growing optimism in the provision of reliable electricity supply by Jonathans administration. The reform and investment legacies of Obasanjos administration actually marked a turning point in the sector. This can be seen in the significant increase in both IPPs participation in power generation and that of increased installation/generation capacity in Table 2.2 above. Again the June 10, 2009 power blackout during the Federal Executive Council session in Aso Rock propelled governments commitment in reviving the power sector.
Investment in the sectors expansion and operation has gathered accelerated momentum from 2010, which continue till date.
2.4.0:
LIMITATIONS OF PREVIOUS STUDIES
Well articulated and commendable as previous studies and research efforts are, it must be noted that they are not without some shortfalls and limitations. In his analysis on improving and sustaining power supply in Nigeria, Ayodele (2001) suggested diversification of primary energy sources without any mention on the environmental implication and economic profitability of those energy sources. Though it is desirable to diversify energy sources for the supply of adequate electricity in Nigeria, it is also reasonable to consider the development of those sources in which the nation has economic advantage and which also has less environmental effect. For example, the radioactive rays from a nuclear accident should be well considered before developing nuclear energy in a low technical efficient human-resource-nation like Nigeria. On a similar note, the abundant coal resources in the country can effectively and efficiently be utilized when energy experts have compared and contrasted the effect of high carbon emission from coal burning plants with a relatively low emission from natural gas plants in which the nation also has in more abundance.
While doing this, both economic and technical cost of available primary energy source should be considered since the ultimate goal of the power sector is to ensure sustainability and economy in its supply of electricity. Another case is that of Sambo (2008). He did not acknowledge the already existing large market for electricity in Nigeria. Nigeria is the current largest market for consumer goods in Africa; it also follows that Nigeria is a well suitable market for electricity supply. Even though that table 2.2 indicated low industrial consumption of electricity, it does not imply absence or low industrial demand for electricity. Most industries switched over to full time self-generated electricity due to the constant power failure in the country, thus actual demand for national grid electricity supply decreased. Again the nations population and the abundance of raw material needs of various industries also qualify the nation for a fertile market in both industrial and residential supply of electricity. It only needs a reliable economic supply-side of electricity to acknowledge the local market potentials. Similarly, Iwayemi (2008) measured electricity consumption by actual demand for national grid electricity without any reference to the huge suppressed demand, which is being supplied through selfgenerated electricity.
To substantiate the existence of high suppressed demand for electricity, Adeola (2009) noted that a total of 750 companies closed their shops in 2006 alone due to power failure problems. He equally observed Nigerias top position among world importers of generator sets since 2002. It is obvious that low consumption of national grid electricity was supplemented with high consumption of self-generated electricity. Thus to capture real demand for electricity in the country, one should include the 50% -100% estimated annual supply of electricity from selfgenerators. Finally in his contribution, Vijayamohanan (2008) failed to consider high inefficiency rate of public corporations as the reason for dominant privatization policy in most economic reforms of developing nations. Even in the presence of essential commodity production like electricity as he argues, public corporations in these nations have failed to stimulate efficiency in production process. This is because of the double role played by government of developing nations which include the role of an active economic agent (participant) and that of an economic regulator at the same time. Among public corporations failure in developing nations include the examples in Nigeria such as NITELs failure to provide functional telephone services until the private sectors intervention; NNPCS failure to meet
local demand for refined petroleum and gas products even after 42 years of establishing a local refinery. The example of NEPAs and PHCNs inability to supply reliable electricity will also not be excluded from the failure list of public corporations in the country.
CHAPTER THREE RESEARCH MEHODOLOGY
3.1.0: This
INTRODUCTION research employs a linear equation technique of
econometrics simulation for its analysis. The merits of this technique according to koutsoyannis (1998) included its theoretical plausibility, explanatory ability, accuracy of the parameters, simplicity and forecasting ability. Thus Economic theory makes statement or hypothesis that is mostly quantitative in nature and as a result it is the choice of the researcher to make judgment on the hypothesis based on appropriate models and method of inference. Such economic technique enables us to obtain the estimate parameters to interpret the result based on the study.
3.2.0:
METHOD OF ESTMATION The Ordinary Least Square method (OLS) shall be used in this
study for two reasons. First, the OLS is an essential component of most other techniques as is fairly simple to compute when compared all other economic techniques. Second, the parameters estimated by OLS have some optimal properties. This means that they posses the BLUE
(Best Linear Unbiased and Efficient estimator) quality (Gujarat; and Porter, 2009)
3.3.0:
MODEL SPECIFICATION SPECIFICATION Economic theory always allows suggesting a model for analysis.
The parameters of these models are estimated based on the available data and the adequacy of the fitted model carefully checked by the following dependent and independent variables below. a) Real Gross Domestic Product (RGDP) b) Total Electricity Supply (TES) c) Total Electricity Consumption (TEC) d) Total Labour Force (TLF) e) Gross Domestic Investment (GDI) f) Money Supply (M2)
3.3.1:
Functional Specification of the Model
RGDP =f(TES. TEC, TLF, GDI, M2) ________3.1
3.3.2:
Mathematical Specification of the Model
RGDPt = + 1TESt + 2TECt + 3LOG(TLFt) + 4GDIt-1 + 5M2t-1 _______3.2 In order to capture both the explained and unexplained relationship between the dependent and independent variables above
the stochastic error term (t) is introduced which gave the econometric model below.
3.3.3:
Econometric Specification of the Model
RGDPt = + 1TESt + 2TECt + 3LOG(TLFt) + 4GDIt-1 + 5M2t-1 + t ________3.3 Where: RGDP = Real gross domestic product (which measures economic growth) TES = Total electricity supply TEC = Total Electricity consumption LOG(TLF) = Natural log of total labour force (It measures percentage change in the labour force). GDI = Gross domestic investment M2 = Money supply = error term t = time trend = intercept 1, 2, 3, 4, 5, = parameters
3.4.0:
EVALUATION OF RESULT The result obtain from this study shall be evaluated based on the
following criteria.
3.4.1:
Economic Criterion (A priori Expectation)
This criterion is concerned with determining the consistency of our parameter estimates with the signs and magnitude defined by the Real Gross Domestic Product. a) Real Gross Domestic product: This is the dependent variable used to measure economic growth in this study. Its size and sign depends on the findings from the model of the study. Thus, it is considered to be stochastic.
b) Total Electricity Supply: This is expected to have a positive relationship with RGDP. This is because the more the quantity and quality of electricity supply, the more the productive activity will increase in the economy. c) Total Electricity Consumption: Electricity consumption is a function of income and price which still determine the size of RGDP. The more a countrys RGDP grows, the more electricity consumption is expected to grow. Thus, it is expected that both TEC and RGDP should be positively related. d) Total Labour Force: Total labour force is expected to be positively related to RGDP since every economy requires a meaningful size of labour force to effectively utilize its resources.
The greater the size of the labour force, the more the chances of economic growth. e) Gross Domestic Domestic Investment: A countrys RGDP is expected to increase as it increases its investment ratio over time, which implies a positive relationship between the two.
f) Money Supply: An increase in money supply is expected to increase the nations output (RGDP) through the transmission mechanism of interest rate, which will increase investment. Thus, the relationship between depend and independent variables are summarize in table 3.1 below. Table 3.1
Variable TESt TECt Log (TLFt) GDIt-1 M2t-1 A priori Expectation 1 > 0 2 > 0 3 > 0 4 > 0 5 > 0
3.4.2:
Statistical Criterion (First Order Test) This include test defined by statistical theory which are used in
determining the reliability of the parameter estimates. According to Keller (2005), they confirm the reliability or statistical relevance of parameter estimates.
i) R2 Test: This is known as coefficient for determination which is

use to measure the goodness of fit of the model.
ii)
T test: This will be used to test the significance of the

individual parameter estimate of the regression model.
iii)
F test: It will be used to test the overall significance of all

the parameters of the regression model
3.4.3:
Econometric Criterion (Second Order Test) This criterion ensures the stability of the parameter estimates, as
to justify their use in policy formulation.
a) Normality Test: This is used to check whether the error term is

normally distributed. That is, to check if the residuals, a proxy for stochastic error term follows normal distribution or not symbolically i.e., t ~ N(0, 2)
The Jarque Bera (JB) test of normality would be adopted for this test.
b) Multicollinearity Test: This test the level of linear relationship or

the collinearity among the explanatory variables used in this model. The essence of this is to see if there is high collinearity among the variables or not so as to know the level of accuracy of our estimated parameters. The correlation matrix table would explain this test.
c) Specification Error Test: This test whether there is specification

bias or error in the model used in this regression analysis. The interest is to check whether the model is correctly specified. That is whether important explanation variables are omitted or unnecessary ones are included, or wrong functional form of relationship between the dependent and explanatory variables exist. The Ramseys RESET test will be used for this study.
d) Test for for Autocorrelation: The importance of this is to see whether

the errors corresponding to different observations are serially correlated or not. Autocorrelation refers to a correlation in the
error between members of a series of observations ordered in time (as in time series) or in space (as in cross sectional) data. The uncorrelated series are desirable. Symbolically E(i j) = 0. NsweyWest HAC will be used to correct errors for
autocorrelation if it exist.
e) Test for Heteroscedasticity: This is used to test whether the

variance of the error term of each observation is constant over time or not. It is expected that the error term have equal spread (i.e. they are homoscedastic). Symbolically, E(2) = 2 ,i=(1,2,n). The Whites General Heteroscedasticity (with no cross term) test will be adopted for this test.
f) Stationarity (Unit Root) test: Stationarity test makes sure that

all the variables employed are mean reverting, that is, they have a constant mean, variances and covariance over time (Gujarati and Porter, 2009). The essence is to help avoid spurious regression. The Augmented Dickey Fuller Test (ADF) would be used for the analysis since it adjusts for serial correlation. The general form is given as: yt = 1 + 2 + yt-1 + iyt -1 + t
g) Cointegration Cointegration test: This is used to know if two variables have a

long term relationship between them or not. It means that despite being individually non stationary, a linear combination of two or more time series variables can be stationary. To ascertain this we use Augmented Dickey-Fuller Test (ADF).
h) Error correction Mechanism (ECM) test: Apart from the existence

of a long-term equilibrium between two variables, there may be a short-term disequilibrium in the relationship between such variables. This mechanism will use the error term to correct the short-term relationship (disequilibrium) there by equilibrating the long-term and short-term relationship.
3.5.0:
SOURCE OF DATA The data used in this research work are secondary data sourced
from various recognized institutions such as the National Bureau of statistics National Statistic Fact Sheet, 2000 and 2009; Central Bank of Nigerias Annual Report and Statement of Account, various series and Statistical Bulletin 2002 and 2009; Power Holding Company of Nigerias Annual Report, several series. The period used covered 37 years, from 1873 to 2009.
CHAPTER FOUR DISCUSSION OF RESEARCH FINDINGS
4.1.0:
PRESNTATION OF RESULTS This chapter is devoted for the presentation and analysis of the
estimate from the regression carried out for the purpose of this study. Economic, statistical and Econometric test were conducted based on the estimated parameters presented below in table 4.1 which is also in line with the model in section 3.3.3.
Table 4.1: Regression output

Variables C TES TEC LOG(TLF) GDI(GDI(-1) M2(M2(-1) Coefficient -446995.1 39.83032 119.8827 32066.15 0.020360 0.032206 Std. Error 161482.9 23.45791 53.74325 1377.35 0.024582 0.009434 T- statistic -2.768065 1.697949 2.230656 2.818419 0.829242 3.413747
R2= 0.930535 F-Stat=80.37407
d-stat=1.209721
4.2.0:
EVALUATION OF REGRESSION RESULT
4.2.1:
Economic Criterion (A priori Expectation)
(a) RGDP: From the table above, the coefficient of the intercept term (c)
is -446995.1. Negative sign of the constant term shows that economic growth (RGDP) will on average, decrease by 446995.1 units if the effect of other variables is held constant or assumed to be insignificant, ceteris paribus.
(b) TES: The coefficient of TES is 39.83032, which shows the mean
value or average response of the RGDP per unit change in TES. That is, the direct or net effects of a unit change in TES of the mean value of RGDP. Thus, holding other regressors constant, a unit change in TES on average will increase RGDP by 39.83032 units. Also the positive sign of this coefficient conformed to a priori expectation that an economy will grow over time as it increases the ratio of its total electricity supply, all things being equal.
(c) TEC: The coefficient of this 119.8827. It measures the change in the
mean value of RGDP resulting from a unit change in TEC. This implies that a unit increase in the value of TEC will result to 119.8827 units increase in RGDP on average if the effect of other variables is held constant.
Economically speaking, the rise in total electricity consumption ratio in a given economy over time will lead to increase in economic activity, which will in turn bring about economic growth. Thus, this coefficient meets the earlier expectation in chapter three.
(d) LOG(TLF): The coefficient of LOG(TLF) is 32066.15, and it

measures the change in the mean value of RGDP for in percentage change in TLF. It is positive and therefore conforms to a priori expectation, because it requires the participation of a meaningful active labour force in productive activity given the size and nature of available resources for an economy to experience growth over time (Jhingan, 2008). Therefore, a percentage change in the value of TLF will on average increase RGDP by 320.6615 units (i.e., (0.01) (32066.15), holding other regessors constant.
(e) GD1(GD1(-1): The coefficient of GD1(-1) is 0.020360.

This measures the mean value of RGDP for a unit change in GD1(-1). It means that a unit increase in GD1(-1) will on average lead to 0.020360 units increase in RGDP if the effect of other explanatory variables are held constant. This relationship was supported by Mankiw (2002), when he argues that an increase in Gross Domestic Investment increases the national
income, which will in turn increase economic growth, all things being equal. In likewise manner, the value of GD1 in the current period (at time t) goes a long way to determine the value of RGGD in the subsequent period (at time t +1). Thus, GD1t-1 explains RGDPt and its coefficient conforms to expectation.
(f) M2(M2(-1): The coefficient of M2(-1) is 0.032206, which shows the mean
value of RGDP per unit change in M2(-1). It means that a unit increase in the value of M2(-1) will on average increase the RGDP by 0.032206 units, holding other variables constant. According to Baumol and Blinder (2006), relatively low rate of interest rate transmission mechanism in real world economy brings about time lag on monetary policy instruments influence on economic behaviour. Thus, an increase in money supply in the last period (at time t-1) will increase the national income via reduction in interest rate, thereby increasing economic growth. This also conforms to a priori expectation.
4.2.2:
Statistical Criterion (First Order Test)
(i) RR-Squared (R2) test: The coefficient of R2 of the model is 0.930535

and the R- Squared adjusted for loss of the degrees of freedom is 0.918957. This implies that the model explains variation in GGDP to the extent of 93 percent, that is, the explanatory variables used in the
model explained up to 93 percent of the total variation in the dependent variable (RGDP).
(ii) TT-test (t(t-statistic): For a two tail test, the decision rule is to reject
the null hypothesis (H0) if the absolute value of the calculated tstatistic is less than the critical t-value, with n-k degrees of freedom at 5 percent level of significance.
Hypothesis testing:
H0: (TES, TEC, LOG(TLF), GD1(-1), and M2(-1) are statistically insignificant).
i.e., H0:1=2=3=4=5= 0 (individually). Decision Rule:

Reject H0 of /tcal/
<
ttab (n-k) at 5% level of significance, do not reject
otherwise. Where n is the number of observations and k is the number of parameters including the intercept. From Appendix 1, n=36, k=6, then n-k =30 and t30 0.025 =2.042 The result of the t-test is presented below and evaluated based on the value of critical t-value above. See table 4.2 below.
Table 4.2: TT-statistic test

Variables C TES TEC LOG(TLF) GD1(GD1(-1) M2(M2(-1) t-statistic -2.768065 1.697949 2.230656 2.818419 0.828242 3.413747 t30 0.025 2.042 2.042 2.042 2.042 2.042 2.042 Decision tcal > 2.042 tcal < 2.042 tcal > 2.042 tcal > 2.042 tcal < 2.042 tcal > 2.042 Remark Significant Insignificant Significant Significant Insignificant Significant
(iii) F(FF-test (F -statistic): This is used to measure the overall significance

of the variables used in the model, and it follows F-distribution.
Hypothesis Testing:
H0: (The model is statistically insignificant)
i.e., H0: 1= 2= 3= 4= 5= 0
with k-1/n-k (d.f), which implies 0.05 (5/30) df.
Decision Rule:
Reject H0 if Fcal < Ftab in absolute term at 5% level of significance, do not reject otherwise. From the regression results, Fcal =80.37407, and Ftab = 2.53 Thus since Fcal (80.37407) > Ftab (2.53), we reject H0 and conclude that the model is statistically significant at 5% level of significance.
4.2.3:
Econometric Criterion (Second Order Test)
(a) Normality Test: The normality test conducted here is the JarqueBera (JB) test which follows the chi-square distribution (X2)with 2 degree of freedom.
Hypothesis testing:
H0:
i
= 0 (the error term is not normal distributed)
Decision Rule:
Reject H0 if JBcal > JBtab at 5% level of significance (i.e., JB statistic is greater than (X20.05) with 2 degrees of freedom), otherwise do not reject. While the tabulated chi-square under 2 d.f is given as X20.05 =5.99147, the calculated JB-statistic from the Appendix B is 3.253600 using the formula below.
JB= n[
()
Where n = no observations (36),
S = skewness (0.510925) and k = kurtosis (4.060608).

Thus, since JBcal (3.25360) < JBtab (5.99147) we reject H0, and thereby conclude that the error term is normally distributed at 5% level of significance.
(b). Multicollinearity Test: For multicollinearity as explained in section

3.4.3(b), we shall use the rule of thumb adopted by Gujarati and porter
(2009) to search if there is high pair-wise correlation among regressors in the model.
Hypothesis testing:
H0: (there is no high multicollnearity among regressors)
Decision Rule:
Reject H0 if the correlation coefficient among regressor is in excess of 0.8, do not reject otherwise. From Appendix C, the partial correlation between other variables is below 0.8, and therefore acceptable except the pair-wise correlation coefficient between TES and TEC which is 0.855724, hence we do not reject H0 and conclude that multicollinearity is severe between total electricity supply and total electricity consumption. This phenomenon was however explained in the Energy Demand
Projection found in Sambo (2008), which shows that there is a problem

of inadequate supply versus high growing demand for electricity in Nigeria. Thus, both demand and supply of electricity tends have a linear trend in the long run relationship, which is the root cause of the high collinearity.
(c). Specification error test: The Ramsey RESET Test (Regression

specification Error Test) is assumed to follow F- distribution.
Hypothesis testing:
H0: (the regression model is not well specified)
Decision Rule:
Reject H0 if (Observed) F(stat) >F (k-1/n-k) d.f at 5% level of significance. From Appendix D ,(obs) F (stat) = 0.142241 while F 0.05 (5/30) = 2.53. Since (obs) F- statistic (0.142241) < F
5 0.05( /30)(2.53),
we reject H0 and
conclude that the model is well specified at 5% level of significance.
(d). Test for Autocorrelation: Newey West HAC was used to correct
the errors for autocorrelation of it exists. Incidentally, Whites heteroscedasticity corrected standard errors are also known as robust standard errors.
(e). Test for Heteroscedasticity: The White Heteroscedasticity test (with

no cross terms) used in this study follows Chi-square distribution (X2) with k degrees of freedom (excluding the intercept term). The equation is contain in Appendix E as follows
2t = + 1TES +2TES2 + 3TEC + 4TEC2 + 5LOG(TLF) +

6LOG(TLF)2 + 7GDI(-1) + 8GDI(-1)2 + 9M2(-1) + 10M2(-1)2 + Vt Obs* R-squared = 17.12567, d.f = 10, n=36, R2 =0.475713.
Hypothesis test:
H0: 1 = 2 = 3 = 4 = 5 = 0 (the is no Heteroscedasticity)
Decision rule:
Reject H0 if Obs* R2 or n. R2 > X2(10) d.f at 5% level of significance, otherwise do not reject. Since Obs* R2 (17.12567) < X2(10) (18.3070) at 5% level of significance, we therefore do not reject H0 and conclude that there is no Heteroscedasticity in the model. This implies that there is
homoscedastic variance. i.e., the error variance in the explanatory variables is constant over time.
(f) Stationarity (unit Root) test: We adopted the Augmented DickeyFuller Test (ADF) which follows t-distribution. Table 4.3 below contains the t-statistic for the included variable extracted from Appendix F and it will be tested at 5% level of significance of the ADF critical value.
Hypothesis testing:
H0: I(1) (the variables are not stationary)
Decision Rule:
Reject H0 if /tcal/</ttab/, i.e., t-statistic is less than ADF critical value (in absolute term) at 5% level of significance, other wise do not reject.
Table 4.3: coefficients of ADF statistic

Variables RGDP t-statistic(ADF) -8.130237 Critical value 1%= -3.6289 5% = - 2.9472 10% = - 6118 1% = - 3.6289 5% = - 2.9472 10% = - 2.6118 1% = - 3.6289 5% = - 2.9472 10% = - 2.6118 1% = - 3.6289 5% = - 2.9472 10% = - 2.6118 1% = - 3.6353 5% = - 2.9499 10% = - 2.6133 1% = - 3.6353 5% = - 2.9499 10% = - 2.6133 Decision /tcal/> - 2.9472 Remark Stationary at 1st difference Stationary at 1st difference Stationary at 1st difference Stationary at 1st difference Stationary at 1st difference Stationary at 2nd difference
TES
-8.341581
/tcal/> - 2.9472
TEC
-7.567411
/tcal/> - 2.9472
LOG(TLF)
-4.286244
/tcal/> - 2.9472
GDI(GDI(-1)
-5.112700
/tcal/> - 2.9499
M2(M2(-1)
10.22992
/tcal/> - 2.9499
The result of stationarity (unit root) test indicated that RGDP, TES, TEC, LOG(TLF), GDI(-1) are stationary i.e., I(0) at 1%, 5% and 10% level of significance, i.e., they are mean reverting at first difference, while M2(-1) is stationary I(0) at second difference at 1%, 5% and 10% level of significance.
(g) Cointegration test: This test usually comes after Unit Root test and
we used the ADF Test for it. The residual series of linear combination of variables integrated of the same order with the dependent variable were generated. The residuals are subjected to stationarity test.
Hypothesis testing:
H0: I(1) (the residual series are non stationary)
Decision cision Rule: De

Reject Ho if the absolute value of -ADF > Critical value ADF 5% Critical Value, do not reject otherwise. From the cointergration result in Appendix G, -ADF = - 5.167541 and critical value ADF at 5% level of significance = -2.9472. Since / -ADF/(5.167541) > /critical value ADF/(2.9472), we reject H0, and thereby conclude that the residual series are stationary I(0) at 5% level of significance. This implies that a long term relationship or equilibrium exist among the variables, i.e., they are cointegrated and hence, the regression of the independent variables on RGDP is not spurious.
(h)
Error Correction Mechanism (ECM) test: The values of the
regressors at level form was combine with their lagged value at first difference, including the lagged value of the residual series in order to check if the variables have short-term relationship or equilibrium.
Hypothesis testing:
H0: = 0 (the residual is not significant)
Decision Rule:
Reject H0 if the absolute value of residual t-statistic is less than ttabulated with (n-k) d.f at 5% level of significance, do not reject otherwise, i.e., if /tcal/< ttab.
From the ECM result in Appendix H, tcal = 3,346141, n = 35, k = 9 and t0.05 = 2.056. Since /tcal/(3.346141) > ttab (2.056), we reject H0 and conclude that the residual is statistically significant at 5% level of significance, suggesting that RGDP adjusts to the explanatory variables with a lag. The residual coefficient (-0.549299) suggest that only about 55% of the discrepancy between long-term and short-term RGDP is corrected within the period of one year.
4.3.0:
EVALUATION OF RESEARCH HYPOTHESES The research hypotheses of this work can be evaluated from the
result of the model. Both T-test and F- test of the statistical criterion, economic criterion and econometric criterion will be used to judge the result of the model From the T-test in section 4.2.2(ii) both TES and GDI(-1) are statistically insignificant, whereas TEC, LOG(TLF) and M2(-1) are
statistically significant. On the other hand, the F-test in section 4.2.2(iii) is also statistically significant, which implies that TES, TEC, LOG (TLF), GDI (-1) and M2 (-1) have a strong relationship with the dependent variable (Real Gross Domestic Product) in Nigeria. Going by the earlier specified model hypotheses in section 1.4, we can conclude from the results of the economic and econometric test that Total Electricity Supply (TES), Total Electricity Consumption (TEC) Total Labour Force (LOG(TLF)), Gross Domestic Investment GDI(-1) and Money Supply (M2(-1) have significant impact on real Gross Domestic Product (RGDP) in Nigeria and base on that, the following conclusion on the research hypotheses were drawn. Total Electricity supply in Nigeria does not have significant impact on the countrys economic growth over the period of the study. Total electricity consumption in Nigeria has a significant impact on the countrys economic growth. Gross domestic investment has no significant impact on economic growth in Nigeria.
4.4.0:
LIMITATIONS OF THE STUDY Despite the high level of effort, bold step and success
demonstrated in this study, it is important to note that it has not been without constrains and limitations. Though there is abundant
literature on electricity sector, only very little formal work has been done on the challenges and prospects of the sector. Most importantly, this research was heavily constrained by availability of sufficient and authentic data, especially those that has to do with comprehensive record on electricity supply, consumption and dependable naira cost per kilowatt of electricity over the years of interest in this study. We were unable to gather meaningful information on the sectors funding, which will enable us ascertain the level of resource management efficiency in the sector. More still, the attempted move to get first hand information on the level of implementation of the Electric Power Sector Reform Act 2005 form district managers of PHCN Nsukka and Enugu were severed by bureaucratic process and unwillingness of the incumbents to supply independent researchers with needed information. Finally, this study was also limited by the short time frame allocated for its completion by the University authority. Due to the above handicaps and limitations to this study, we hereby recommend the following areas of interest to interested researchers; Managerial and operational efficiency in the Nigerian power sector. Capacity utilization and productivity in the sector. Human capacity development in the electricity industry.
CHAPTER FIVE SUMMARY, POLICY RECOMMENDATION AND CONCLUSION
5.1.0:
SUMMARY In summary, the choice of this research topic was made as a
result of unbearable setbacks of inadequate and unreliable electricity supply on economic growth and welfare in Nigeria. Constant power failure has the bane of industrialization and agricultural development in the past three decades. Thus, it calls for an intensive but professional enquiry which will generate dependable solution to the problems. In the course of carrying out this research, a time series data sourced form three recognized institutions that include the National Bureau of Statistics, Central Bank of Nigeria, and Power Holding Company of Nigeria, which covers between 1973 and 2009, was used. The study employed the Ordinary Least Square (OLS) technique of regression analysis, using the Eviews 3.1 econometrics software. To demonstrate the proficiency of this study, estimated parameters generated form the above process was tested using economic, statistical, and econometric criterion simultaneously. Evidence from
this test confirms the robustness of the model and reliability of its output. Finally, from the analysis already conducted in chapter four, our result shows that electricity supply and domestic investment, though positively related to RGDP, does not have significant effect on economic growth in Nigeria. It equally shows on the other hand that electricity consumption, money supply, and total labour force are both positively related to RGDP and at the same time have significant effect on economic growth over the period of study.
5.2.0:
POLICY RECOMMENDATION to the findings of this research, the following
With respect
recommendations are relevant: In order to maintain a sustainable and affordable power supply, the Federal Government should increase the pace of privatization and liberalization policy of the power sector which was initiated the establishment of Electric Power Sector Reform Act (EPSRA) 2005. By privatization and liberalization we mean that the sector should be freed from direct government control, and that competition be introduced at the private sector level participation. This will go a long way to benefit the nation with respect to efficiency and productivity due to the already existing large market and primary energy resources in the country.
For this benefit to materialize, substantial investment is expected to be made in the areas of power generation to boost generation capacity from current 3800MW to about 14,000MW estimated in the National Energy Commissions Electricity Demand
Projection for Nigeria in 2011 and 2012. This according to the agency
will enable the nation meet its power supply requirements for the achievement of her vision 20:2020 dream. Also both transmission and distribution capacity of operating companies should be expanded and total overhaul should be carried out before total transfer and liberalization of the industry will be completed. The policy benefit of this action will be that competent private investors will be easily attracted by already existing large capital base, given the technical requirements for a profitable investment in the industry. To follow this action, will be a provision, which will establish a regulatory agency to oversee the activities and curtail excesses of profit maximizing and exploitative private investors. Again, the government should introduce a policy which will encourage human capital development in the areas of electrical technology so as to minimize losses from insufficient technical and managerial skills in the industry, which effectively undermines productivity in the sector. It will also help to increase local investors participation in the sector to checkmate dominance of foreign investors.
Nigeria will stand to benefit form a policy of this nature with respect to employment generation, as it will boost its economic growth and development capacity through research and development that comes with multiple link of the sector with other sectors in the economy.
5.3.0:
CONCLUSION From the analysis already conducted on the impact of sustainable
power (electricity) supply on economic growth, which used Real Gross Domestic Product as a proxy for economic growth, we were able to show that electricity supply, though positively related to RGDP, does not have a significant effect on economic growth in Nigeria. The study revealed that Nigeria has large potential for electricity supply which has not been effectively harnessed to increase both qualitative and qualitative supply of this important infrastructural need of economy. The policy implication of the above insignificant effect of electricity supply and investment level is that the economy will always show slow growth rate, which will not be sustain in a long-run. This is due to the fact that productivity is prone to decline in the presences of rapidly growing population under inadequate investment in critical infrastructure like power supply.
Another implication is that the development of other sectors such as industry and agriculture will be adversely affected due to their heavy direct and indirect dependence on electric supply, especially in the face of rising cost of alternative power supply. This development however is inimical to a reasonable and sustainable growth due to the central role played by power supply in every economy. It is on this note that the government should consider it necessary to take a visible but urgent step to equip the sector and prepare it for the competition of a private sector driven market, which will make it more viable and efficient.
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APPENDIX APPENDIX A: REGRESSION RESULT

Dependent Variable: RGDP Method: Least Squares Date: 07/21/11 Time: 01:18 Sample(adjusted): 1974 2009 Included observations: 36 after adjusting endpoints Newey-West HAC Standard Errors & Covariance (lag truncation=3) Variable Coefficient Std. Error t-Statistic Prob. C -446995.1 161482.9 -2.768065 0.0096 TES 39.83032 23.45791 1.697949 0.0999 TEC 119.8827 53.74325 2.230656 0.0333 LOG(TLF) 32066.15 11377.35 2.818419 0.0085 GDI(-1) 0.020360 0.024582 0.828242 0.4141 M2(-1) 0.032206 0.009434 3.413747 0.0019 R-squared 0.930535 Mean dependent var 286400.6 Adjusted R-squared 0.918957 S.D. dependent var 187383.1 S.E. of regression 53344.26 Akaike info criterion 24.75793 Sum squared resid 8.54E+10 Schwarz criterion 25.02185 Log likelihood -439.6428 F-statistic 80.37407 Durbin-Watson stat 1.209721 Prob(F-statistic) 0.000000
APPENDIX B: NORMALITY TEST

12 10 8 6 4 2 0 -100000
S eries: Residuals S ample 1974 2009 Observations 36 Mean Median Maximum Minimum S td. Dev. S kewness K urtosis Jarque-B era P robability 1.66E -10 889.6878 148982.6 -98243.85 49387.19 0.510925 4.060608 3.253600 0.196558
-50000
50000
100000
150000
APPENDIX C: MULTICOLLINEARITY TEST

CORRELATION MATRIX
TES TEC LOG(TLF) GDI(-1) M2(-1) TES 1.000000 0.855724 0.638140 0.639066 0.660420 TEC 0.855724 1.000000 0.753276 0.675511 0.789385 LOG(TLF) 0.638140 0.753276 1.000000 0.353306 0.411802 GDI(-1) 0.639066 0.675511 0.353306 1.000000 0.700740 M2(-1) 0.660420 0.789385 0.411802 0.700740 1.000000
APPENDIX D: SPECIFICATION ERROR TEST

Ramsey RESET Test: F-statistic Log likelihood ratio 0.142241 0.176143 Probability Probability 0.708809 0.674709
Test Equation: Dependent Variable: RGDP Method: Least Squares Date: 07/21/11 Time: 02:42 Sample: 1974 2009 Included observations: 36 Newey-West HAC Standard Errors & Covariance (lag truncation=3) Variable C TES TEC LOG(TLF) GDI(-1) M2(-1) FITTED^2 R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Durbin-Watson stat Coefficient -476116.9 55.23553 144.8377 33170.96 0.032110 0.053251 -4.70E-07 0.930874 0.916572 54123.62 8.50E+10 -439.5547 1.229005 Std. Error 181125.8 47.27484 85.74089 11909.47 0.039908 0.056614 1.25E-06 t-Statistic -2.628654 1.168392 1.689249 2.785259 0.804591 0.940593 -0.377148 Prob. 0.0136 0.2522 0.1019 0.0093 0.4276 0.3547 0.7088 286400.6 187383.1 24.80859 25.11650 65.08705 0.000000
Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic)
APPENDIX E: HETEROSCEDASTICITY TEST

White Heteroskedasticity Test: F-statistic Obs*R-squared 2.268380 17.12567 Probability Probability 0.047123 0.071629
Test Equation: Dependent Variable: RESID^2 Method: Least Squares Date: 07/21/11 Time: 02:52 Sample: 1974 2009 Included observations: 36 Newey-West HAC Standard Errors & Covariance (lag truncation=3) Variable C TES TES^2 TEC TEC^2 LOG(TLF) (LOG(TLF))^2 GDI(-1) GDI(-1)^2 M2(-1) M2(-1)^2 R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Durbin-Watson stat Coefficient 1.89E+11 -5716433. 1137.279 -14721104 6041.891 -2.25E+10 7.12E+08 -3193.318 0.000680 1360.864 -0.000187 0.475713 0.265998 3.60E+09 3.25E+20 -836.7159 1.695865 Std. Error 9.84E+10 9664614. 1889.747 8851051. 4662.896 1.26E+10 3.96E+08 6940.361 0.002184 3984.322 0.000358 t-Statistic 1.923539 -0.591481 0.601816 -1.663204 1.295738 -1.790479 1.799722 -0.460108 0.311379 0.341555 -0.521794 Prob. 0.0659 0.5595 0.5527 0.1088 0.2069 0.0855 0.0840 0.6494 0.7581 0.7355 0.6064 2.37E+09 4.21E+09 47.09533 47.57918 2.268380 0.047123
APPENDIX F: STATIONARITY (UNIT ROOT) TEST
FOR REAL GROSS DOMESTIC PRODUCT (RGDP)

ADF Test Statistic -8.130237 1% Critical Value* 5% Critical Value 10% Critical Value -3.6289 -2.9472 -2.6118
*MacKinnon critical values for rejection of hypothesis of a unit root.
Augmented Dickey-Fuller Test Equation Dependent Variable: D(RGDP,2) Method: Least Squares Date: 07/21/11 Time: 02:49 Sample(adjusted): 1975 2009 Included observations: 35 after adjusting endpoints Variable D(RGDP(-1)) C R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Durbin-Watson stat Coefficient -1.209659 19910.01 0.667006 0.656915 42104.34 5.85E+10 -421.3099 1.171383 Std. Error 0.148785 7660.793 t-Statistic -8.130237 2.598949 Prob. 0.0000 0.0139 -3138.931 71882.94 24.18913 24.27801 66.10075 0.000000
FOR TOTAL ELECTRICITY SUPPLY (TES)

Augmented Dickey-Fuller Test Equation Dependent Variable: D(TES,2) Method: Least Squares Date: 07/21/11 Time: 02:56 Sample(adjusted): 1975 2009 Included observations: 35 after adjusting endpoints Variable D(TES(-1)) C R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Durbin-Watson stat Coefficient -1.363984 75.25205 0.678306 0.668558 523.1737 9032455. -267.7301 2.252181 Std. Error 0.163516 89.00498 t-Statistic -8.341581 0.845481 Prob. 0.0000 0.4039 -8.820000 908.7449 15.41315 15.50203 69.58198 0.000000
FOR TOTAL ELECTRICITY CONSUMPTION (TEC)

Augmented Dickey-Fuller Test Equation Dependent Variable: D(TEC,2) Method: Least Squares Date: 07/21/11 Time: 02:57 Sample(adjusted): 1975 2009 Included observations: 35 after adjusting endpoints Variable D(TEC(-1)) C R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Durbin-Watson stat Coefficient -1.268690 64.95389 0.634413 0.623334 170.6948 961511.5 -228.5288 2.045577 Std. Error 0.167652 30.08925 t-Statistic -7.567411 2.158707 Prob. 0.0000 0.0382 0.348571 278.1264 13.17308 13.26195 57.26571 0.000000
FOR TOTAL LABOUR FORCE (LOG(TLF))

Augmented Dickey-Fuller Test Equation Dependent Variable: D(LOG(TLF),2) Method: Least Squares Date: 07/21/11 Time: 02:59 Sample(adjusted): 1975 2009 Included observations: 35 after adjusting endpoints Variable D(LOG(TLF(-1))) C R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Durbin-Watson stat Coefficient -0.715635 0.102550 0.357625 0.338159 0.262861 2.280172 -1.868650 1.953386 Std. Error 0.166961 0.050205 t-Statistic -4.286244 2.042629 Prob. 0.0001 0.0491 0.002362 0.323110 0.221066 0.309943 18.37189 0.000148
FOR GROSS DOMESTIC INVESTMENT (GDI(-1))

Augmented Dickey-Fuller Test Equation Dependent Variable: D(GDI(-1),2) Method: Least Squares Date: 07/21/11 Time: 03:01 Sample(adjusted): 1976 2009 Included observations: 34 after adjusting endpoints Variable D(GDI(-2)) C R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Durbin-Watson stat Coefficient -1.637393 62565.13 0.449602 0.432402 454497.4 6.61E+12 -490.1295 1.512495 Std. Error 0.320260 81969.31 t-Statistic -5.112700 0.763275 Prob. 0.0000 0.4509 -67124.46 603268.7 28.94879 29.03858 26.13970 0.000014
FOR MONEY SUPPLY (M2(-1))

ADF Test Statistic 10.22992 1% Critical Value* 5% Critical Value 10% Critical Value -3.6353 -2.9499 -2.6133
Augmented Dickey-Fuller Test Equation Dependent Variable: D(M2(-1),2) Method: Least Squares Date: 07/21/11 Time: 03:04 Sample(adjusted): 1976 2009 Included observations: 34 after adjusting endpoints Variable D(M2(-2)) C R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Durbin-Watson stat Coefficient 0.513137 -8019.999 0.765827 0.758509 106667.5 3.64E+11 -440.8473 1.938702 Std. Error 0.050160 20200.83 t-Statistic 10.22992 -0.397013 Prob. 0.0000 0.6940 79640.44 217060.9 26.04984 26.13963 104.6512 0.000000
APPENDIX G: COINTEGRATION TEST

Augmented Dickey-Fuller Test Equation Dependent Variable: D(RESIDUAL) Method: Least Squares Date: 07/21/11 Time: 02:46 Sample(adjusted): 1975 2009 Included observations: 35 after adjusting endpoints Variable RESIDUAL(-1) C R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Durbin-Watson stat Coefficient -0.735298 -4447.190 0.447268 0.430519 41415.33 5.66E+10 -420.7324 1.717904 Std. Error 0.142292 7001.218 t-Statistic -5.167541 -0.635202 Prob. 0.0000 0.5297 -4976.506 54880.93 24.15614 24.24501 26.70348 0.000011
APPENDIX H: ERROR CORRECTION MODEL

Dependent Variable: D(RGDP) Method: Least Squares Date: 07/21/11 Time: 02:14 Sample(adjusted): 1975 2009 Included observations: 35 after adjusting endpoints Newey-West HAC Standard Errors & Covariance (lag truncation=3) Variable C D(TES) D(TES(-1)) D(TEC) D(TEC(-1)) D(LOG(TLF)) D(LOG(TLF(-1))) D(GDI(-1)) D(M2(-1)) RESIDUAL(-1) R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood Durbin-Watson stat Coefficient 11325.46 16.25778 4.946266 23.04836 -0.123894 481.3478 -25811.01 0.019080 0.024521 -0.549299 0.388649 0.168562 38944.61 3.79E+10 -413.7209 1.432909 Std. Error 9606.000 13.57134 13.98638 45.79400 40.27023 26301.80 27209.79 0.016673 0.013468 0.164159 t-Statistic 1.178998 1.197949 0.353649 0.503305 -0.003077 0.018301 -0.948593 1.144385 1.820734 -3.346141 Prob. 0.2495 0.2422 0.7266 0.6192 0.9976 0.9855 0.3519 0.2633 0.0806 0.0026 15915.14 42710.29 24.21262 24.65701 1.765891 0.125987
APPENDIX I: SAMPLE DATA

Year 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 RGDP
(N millions)
TES
(MW)
TEC
(MW)
GDI
(N millions)
TLF 404800.8 452490.7 698910.1 1375780.2 1809850.9 2874430.3 3827070.5 4446520.5 7222250.5 9069800.8 10563960 11946000 10372181 10976830 11938470 33721810 39956380 41932650 50988860 57354490 61880350 39701490 25334690 33698720 32911630 34873420 45372860 47453290 48330000 47330000 51040000 50130000 48990000 57210000 55670000 54360000 66000000
M2
(N millions)
Residual -148983 -10243.9 -37696 -55360.3 -79785.7 -82403.2 -98243.8 79498.9 21605 1899.61 7511.56 81208.3 -2277.53 -7975.6 -25489.9 -35250.2 6341.15 -8990.18 -16707.5 -69062.1 -24023.9 750.148 1029.23 10978.3 19433.6 20275.6 25183.8 33097.1 57709.9 -38604.5 45951.7 53338 21154.5 12479.7 -31119.5 -25194.7
5310 159919.7 25172 29146.5 31520.3 29212.4 29948 31546.8 205222.1 199685.3 185598.1 183563 201036.3 205971.4 204806.5 219875.6 236729.6 267550 265379.1 271365.5 244833.3 275450.6 281407.4 293745.4 302022.5 310890.1 312183.5 329178.7 357994.3 433203.5 477533 527576 561931.4 595821.6 634251.1 672202.6 716949.7
244.5 210.3 315.9 404 486.4 460.7 448 531 638.6 672.6 697 619.5 687.8 841.9 852.9 826.4 976.5 898.5 903 995 1084.9 1097.2 1121.9 1191 1247.4 1177.6 1174.1 907.4 834.8 1340.1 3801.7 1917.9 2034.4 2540.7 2406 2401.8 2058.9
232.7 266.2 318.7 369.8 435.7 504.4 460.1 536.9 335.9 685.6 696.7 625.5 171.4 841.8 852.9 853.5 976.8 898.5 946.6 993 1141.4 1115 1050.9 1033.3 1009.6 972.8 883.7 1017.3 1104.7 1271.8 1519.5 1825.8 1873.1 1920.4 1967.7 2015 2060.7
586.8 1137.1 1815.2 2255.3 2592.8 2009.7 4161.8 5769.9 12215 10922 8135 5417 5573 7323 10661 12383.7 18414.4 30626.8 35423.9 68640.3 80948.1 85021.9 114476.3 17215.7 205553.3 192984.4 175735.4 268894.5 371897.9 438114.9 42928.9 456970 1316957.4 1739636.9 2693554.3 411872.8 414068.4
1522.5 2352.3 4241.2 5905.1 7898.8 7985.4 10224.6 15100 66161.7 18093.6 20879.1 23370 26277.6 27389.8 33667.4 45446.9 47055 68662.5 87499.8 129085.5 198479.2 266944.9 318763.5 370333.5 429731.3 525637.8 699733.7 1036079.5 1315869.1 1599494.6 1985191.8 2263587.9 2814846.1 4027901.7 5809826.5 8518431.2 9575177.9

Sustainable Power Supply and Economic Growth in Nigeria - Empirical Evidience

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SUSTAINABLE POWER SUPPLY AND ECONOMIC GROWTH IN NIGERIA: Empirical Evidence

SUSTAINBLE POWER SUPPLY AND ECONOMIC GROWTH IN NIGERIA: Empirical Evidence

Researcher: Nwafee Francis Ikechukwu

Supervisor: Dr Ugbor I. Kalu

FRANCIS IKECHUKWU NWAFEE

SUSTAINABLE POWER SUPPLY AND ECONOMIC GROWTH IN NIGERIA: Empirical Evidence

SUSTAINABLE POWER SUPPLY AND ECONOMIC GROWTH IN NIGERIA: Empirical Evidence

NWAFEE, FRANCIS IKECHUKWU 2007/149525

SUSTAINABLE POWER SUPPLY AND ECONOMIC GROWTH IN NIGERIA: Empirical Evidence

SUSTAINABLE POWER SUPPLY AND ECONOMIC GROWTH IN NIGERIA: Empirical Evidence

Researcher: Nwafee Francis Ikechukwu

Supervisor: Dr. Ugbor I. Kalu Page iii

SUSTAINABLE POWER SUPPLY AND ECONOMIC GROWTH IN NIGERIA: Empirical Evidence

Researcher: Nwafee Francis Ikechukwu

Supervisor: Dr. Ugbor I. Kalu Page iv

SUSTAINABLE POWER SUPPLY AND ECONOMIC GROWTH IN NIGERIA: Empirical Evidence

Researcher: Nwafee Francis Ikechukwu

Supervisor: Dr. Ugbor I. Kalu Page v

SUSTAINABLE POWER SUPPLY AND ECONOMIC GROWTH IN NIGERIA: Empirical Evidence

_____________________________ Dr. Ugbor I. Kalu (Project Supervisor)

_____________________________ Prof. C. C. Agu (Head, Department of Economics)

_____________________________ Prof. E. O. Ezeani (Dean, Faculty of the Social Sciences)

_____________________________ External Examiner

Researcher: Nwafee Francis Ikechukwu

Supervisor: Dr. Ugbor I. Kalu Page vi

SUSTAINABLE POWER SUPPLY AND ECONOMIC GROWTH IN NIGERIA: Empirical Evidence

Title page Dedication

Acknowledgement Approval page

Table of Content Abstract

CHAPTER ONE Introduction

1.7.0: Definition of Basic Terms

CHAPTER TWO Literature Review

2.1.0: Conceptual Framework

Supervisor: Dr. Ugbor I. Kalu Page vii

SUSTAINABLE POWER SUPPLY AND ECONOMIC GROWTH IN NIGERIA: Empirical Evidence

2.2.0: Theoretical Framework

2.2.4: Power Supply and Nigerias Vision 20:2020

2.4.0: Limitations of Previous Studies

CHAPTER THREE Research Methodology 3.1.0: Introduction

3.2.0: Method of Estimation 3.3.0: Model Specification

3.3.1: Functional Specification of the Model

3.4.3: Econometric Criterion 3.5.0: Source of Data

SUSTAINABLE POWER SUPPLY AND ECONOMIC GROWTH IN NIGERIA: Empirical Evidence

Discussion of Research Findings 4.1.0: Presentation of Result

4.2.3: Econometric Criterion

4.3.0: Evaluation of Research Hypotheses 4.4.0: Limitations of the Study

5.2.0: Policy Recommendation

Researcher: Nwafee Francis Ikechukwu

Supervisor: Dr. Ugbor I. Kalu Page ix

SUSTAINABLE POWER SUPPLY AND ECONOMIC GROWTH IN NIGERIA: Empirical Evidence

SUSTAINABLE POWER SUPPLY AND ECONOMIC GROWTH IN NIGERIA: Empirical Evidence

CHAPTER ONE INTRODUCTION

Researcher: Nwafee Francis Ikechukwu

Supervisor: Dr Ugbor I. Kalu

SUSTAINABLE POWER SUPPLY AND ECONOMIC GROWTH IN NIGERIA: Empirical Evidence

Researcher: Nwafee Francis Ikechukwu

Supervisor: Dr. Ugbor I. Kalu Page 2

SUSTAINABLE POWER SUPPLY AND ECONOMIC GROWTH IN NIGERIA: Empirical Evidence

hydraulicity phenomenon, that is, seasonal water

SUSTAINABLE POWER SUPPLY AND ECONOMIC GROWTH IN NIGERIA: Empirical Evidence

Researcher: Nwafee Francis Ikechukwu

Supervisor: Dr. Ugbor I. Kalu Page 4