Energy and Economic Development in Nigeria: An Econometric Approach based on Fractional Integration

  • Luis Alberiko Gil-Alana School of Economics, University of Navarra, Spain
  • Samuel Chibuzor Umeh School of Economics, University of Navarra, Spain
Keywords: energy, economic development, long-range dependence, fractional differentiation, fractional cointegration


The relationship between economic development and energy in Nigeria is examined in this work. An econometric model is developed to ccount for the factors affecting economic growth and development in the country. The results show that the variables have long memory and all except electricity consumption are non-mean reverting.  The series are heterogeneous with respect to the order of integration. Using OLS regressions with fractionally integrated errors, we found that electricity consumption, oil prices, electricity prices, real interest rate and employment affect GDP per capita with only real interest rate having a negative relationship. Policy recommendations are proposed in the article.


Acaravci, A., & Ozturk, I. (2010). On the relationship between energy consumption, CO2 emissions and economic growth in Europe. Energy, 35(12), 5412-5420.
Akinkunmi, M. A. (2017). Nigeria’s Economic Growth: Past, Present and Determinants. Journal of Economics and Development Studies 5(2), 31-46.
Akinlo, A. E. (2008). Energy consumption and economic growth: evidence from 11 Sub- Sahara African countries. Energy Economics, 30(5), 2391–2400.
Akinsola, M. O., & Odhiambo, N. M. (2020). Asymmetric effect of oil price on economic growth: Panel analysis of low-income oil-importing countries. Energy Reports, 6, 1057-1066.
Alaska (2004). Contaminant Program. Retrieved June 17, 2017, from
Al-mulali, U., & Che Sab, C. N. B. (2012). The impact of energy consumption and CO2 emission on the economic growth and financial development in the Sub-Saharan African countries. Energy 39, 180-186.
Amnesty International (2011). UN Confirms Massive Oil Pollution in Niger Delta. Retrieved June 19, 2017, from
Apergis, N., & Payne, J. E. (2009). Energy consumption and economic growth in Central America: evidence from a panel cointegration and error correction model. Energy Economics, 31(2), 211–216.
Auty, R. (1993). Sustaining development in the mineral economies: the resource curse thesis. London: Routledge.
Awe, O. O., Akinlana, D. M., Yaya, O. S., & Aromolaran, O. (2018). Time Series Analysis of the Behaviour of Import and Export of Agricultural and Non-Agricultural Goods in West Africa: A Case Study of Nigeria. Agris On-Line Papers in Economics & Informatics, 10(2), 15-22.
Awe, O. O., Crandell, I., Adepoju, A. A., & Leman, S. (2015). A Time Varying Parameter State-Space Model for Analyzing Money Supply-Economic Growth Nexus. Journal of Statistical and Econometric Methods, 4(1), 73-95. Retrieved from
Awe, O. O., Mudida, R., & Gil-Alaña, L. A. (2020). Comparative analysis of economic growth in Nigeria and Kenya: A fractional integration approach. International Journal of Finance & Economics, 26(2), 1197-1205.
Berndt, E., & Wood, D. (1975). Technology, Prices and The Derived Demand for Energy. The Review of Economics and Statistics, 57, 259-268.
Bowden, N., & Payne, J.E. (2010). Sectoral Analysis of the Causal Relationship Between Renewable and Non-Renewable Energy Consumption and Real Output in the US. Energy Sources, Part B: Economics, Planning, and Policy, 5(4), 400-408.
Can, M., & Gozgor, G. (2017). The impact of economic complexity on carbon emissions: evidence from France. Environmental Science Pollution Research, 24, 16364–16370.
Chen P. F., & Lee C. C. (2007). Is energy consumption per capita broken stationary? New evidence from regional-based panels. Energy Policy 35, 3526-40.
Cho, S., Heo, E. & Kim, J. (2015). Causal relationship between renewable energy consumption and economic growth: comparison between developed and less-developed countries. Geosystem Engineering, 18, 284–291.
Corina, P., & Claudiu, C. (2012). Econometric perspective of the energy consumption and economic growth relation in European Union. Renewable and Sustainable Energy Reviews, 16(8), 5718-5726.
Cuestas, J. C., & Gil-Alana, L. A. (2016). A nonlinear approach with long rage dependence based on Chebyshev polynomials in time. Studies in Nonlinear Dynamics and Econometrics, 20, 57-74.
Daily Independent (2010). Shell and the N15bn Oil Spill Judgement Debt. The Daily Independent (Lagos). 19 July 2010. Archived
Dong, K., Hochman, G., Zhang, Y., Sun, R., Li, H., & Liao, H. J. E. E. (2018). CO2 emissions, economic and population growth, and renewable energy: Empirical evidence across regions. Energy Economics, 75, 180-192.
Ebohon, O. J. (1996). Energy, economic growth and causality in developing countries. Energy Policy, 24, 447-453.
Fallahi F. (2011). Causal relationship between energy consumption (EC) and GDP: a markov-switching (MS) causality. Energy, 36, 4165-70.
Geweke, J., & Porter-Hudak, S. (1983). The estimation and application of long memory time series models. Journal of Time Series Analysis, 4(4), 221-238.
Ghali, K. H., & El-Sakka, M. I. T. (2004). Energy use and output growth in Canada: a multivariate cointegration analysis. Energy Economics, 26(2), 225–238.
Ghosh, S. (2010). Examining carbon emissions economic growth nexus for India: A multivariate cointegration approach. Energy Policy, 38(6), 3008-3014.
Gil-Alana, L. A., & O. Yaya (2021). Testing fractional unit roots with nonlinear smooth break approximations using Fourier functions. Journal of Applied Statistics, forthcoming.
Gil-Alana, L. A., Mudida, R., & Carcel, H. (2017). Shocks Affecting Electricity Prices in Kenya, A Fractional Integration Study. Energy, 124, 521-530.
Glasure, Y. U. (2002). Energy and national income in Korea: further evidence on the role of omitted variables. Energy Economics, 24(4), 355–365.
Griffin, J. M. (1979). Energy Conservation in the OECD: 1980-2000. Ballinger Publishers, Cambridge, MA.
Gylfason, T. (2001). Lessons from the Dutch disease: Causes, treatment, and cures. Institute of Economic Studies Working Paper Series W01:06, 1-25
Hsu Y. C., Lee, C. C., & Lee C. C. (2008). Revisited: are shocks to energy consumption permanent or temporary? New evidence from a panel SURADF approach. Energy Economics, 30, 2314-30.
Hudson, E. A., & Jorgenson, D. W. (1974). US energy policy and economic growth, 1975-2000. Bell Journal of Economics and Management Science, 5(2), 461-514.
Kebede, E., Kagochi, J., & Jolly, C. (2010). Energy consumption and economic development in Sub-Sahara Africa. Energy Economics, 32, 532-7. Retrieved from
Lean, H. H., & Song, Y. (2009). Long memory in US disaggregated petroleum consumption: evidence from univariate and multivariate LM tests for fractional integration. Energy Policy, 37, 3205-3211
Lee, C., & Chang C. (2007). The impact of energy consumption on economic growth: evidence from linear and nonlinear models in Taiwan. Energy, 32, 2282-94.
Matsui, K. et al. (1978). Economic Activity and Energy on a Stable Growth Course. The Institute of Energy Economics Research Report, 78-2. Tokyo.
Mazur, A., Phutkaradze, Z., & Phutkaradze, J. (2015). Economic Growth and Environmental Quality in the European Union Countries – Is there Evidence for the Environmental Kuznets Curve? International Journal of Management and Economics, 45(1), 108-126.
Mishra, V., Sharma, S., & Smyth R. (2009). Are fluctuations in energy consumption per capita transitory? Evidence from a panel of Pacific island countries. Energy Policy, 37, 2318-2326.
Narayan P. K., & Smyth, R. (2007). Are Shocks to energy consumption permanent or transitory? Evidence from 182 Countries. Energy Policy, 35, 333-341.
National Planning Commission (NPC). (1997). National rolling plan (1997–1999).
NNPC (2013). NNPC Annual Statistical Bulletin. Retrieved August 31, 2020, from
Oyedepo, S. (2014). Towards achieving energy for sustainable development in Nigeria. Renewable and Sustainable Energy Reviews, 34, 255–272.
Oyedepo, S. (2012). On energy for sustainable development in Nigeria. Renewable and Sustainable Energy Reviews, 16(5), 2583-2598.
Payne J. E. (2010). On biomass energy consumption and real output in the US. Energy Sources, Part B: Economics, Planning, and Policy, 6, 47-52.
Radmehr, R., Henneberry, S. R., & Shayanmehr, S. (2021). Renewable Energy Consumption, CO2 Emissions, and Economic Growth Nexus: A Simultaneity Spatial Modeling Analysis of EU Countries. Structural Change and Economic Dynamics, 57, 13-27.
Rafindadi, A. A., & Ozturk, I. (2017). Impacts of renewable energy consumption on the German economic growth: Evidence from combined cointegration test. Renewable and Sustainable Energy Reviews, 75, 1130–1141.
Robinson, P. M. (1995), Log-Periodogram Regression of Time Series with Long Range Dependence. Annals of Statistics, 23(3), 1048-1072.
Robinson, P.M. (1994). Efficient tests of nonstationary hypotheses. Journal of the American Statistical Association, 89, 1420-1437.
Ross, M. L. (2015). What Have We Learned About the Resource Curse? Annual Review of Political Science, 18, 239-259.
Saleh, M. A. (2015). Value and Risk Management, [MSc. Research Module] Available at: School of Energy, Geoscience, Infrastructure and Society. Heriot Watt University Edinburgh, United Kingdom. [unpublished]
Saleh, M. A. et al (2017). Risk and Environmental Implications of Oil Spillage in Nigeria (Niger-Delta Region). IIARD International Journal of Geography and Environmental Management 3(2), 44-53. Retrieved from
Sambo, A. S. (2009). Strategic developments in renewable energy in Nigeria. International Association of Energy Economics, 15–19.
Soava, G., Mehedintu, A., Sterpu, M., & Raduteanu, M. (2018). Impact of renewable energy consumption on economic growth: Evidence from European Union countries. Technological and Economic Development of Economy, 24, 914–932.
Susuki, K., & Takenaka, H. (1981). The role of investment for energy conservation: Future Japanese economic growth. Energy Economics 3(4), 233-243.
U.S. Fish & Wildlife Service (2017). WILD. Retrieved June 17, 2017, from
UNDP (2013). Niger Delta Human Development Report. p. 76. Perfect Printers Ltd, Lagos
Venables, A. J. (2016). Using Natural Resources for Development: Why Has it Proven so Difficult? Journal of Economic Perspectives, 30(1), 161–184.
Vidal, J. (2010). Nigeria's agony dwarfs the Gulf oil spill. The US and Europe ignore it. The Observer. Retrieved August 31, 2020, from
Warr, B. S., & Ayres, R. U. (2010). Evidence of causality between the quantity and quality of energy consumption and economic growth. Energy, 35, 1688-93.
Wesseh, P. K., & Lin, B. (2018). Energy consumption, fuel substitution, technical change, and economic growth: Implications for CO2 mitigation in Egypt. Energy Policy, 117, 340-347.
World Bank (1993). Issues and Options in the Energy Sector, Report No. 11672-UNI. Nigeria: World Bank.
World Bank (2014). Doing Business 2015: Going Beyond Efficiency. Washington, DC: World Bank Group.
World Bank (2019). The World Bank in Nigeria. Retrieved August 31, 2020, from
Yaya, O., Ogbonna, A. E., Furuoka, F., & Gil-Alana, L. A. (2021). A New Unit Root Test for Unemployment Hysteresis Based on the Autoregressive Neural Network, Oxford Bulletin of Economics and Statistics, forthcoming.
Yoo, S. (2006). Oil consumption and economic growth: evidence from Korea. Energy Sources, Part B: Economics, Planning, and Policy, 1, 235-243.
You, J. (2011). China’s energy consumption and sustainable development: comparative evidence from GDP and genuine savings. Renewable and Sustainable Energy Reviews, 15, 2984-2989.