Asian Journal of Economics, Finance and Management

Volume 5, Issue 1, Page 332-344, 2023; Article no.AJEFM.1379

Energy Demand and Inclusive

Economic Growth in Nigeria
Alwell Nteegah a* and Innocent Kumanwe b
a Department of Economics, University of Port Harcourt, Nigeria.
bEmerald Energy Institute, University of Port Harcourt, Nigeria.

Authors’ contributions

This work was carried out in collaboration between both authors. Both authors read and approved the
final manuscript.

Received: 25/07/2023
Original research Article Accepted: 27/09/2023
Published: 02/10/2023

ABSTRACT
This study examined the impact of energy demand on inclusive economic growth in Nigeria over
the period 1990 – 2021. To achieve this purpose, data on inclusive growth proxy by Gross
domestic product per person employed in Nigeria, and energy demand measured by demand for:
solar energy, hydropower energy, petroleum energy, natural gas energy and coal energy were
sourced from the World Bank and International Energy Agency. The data were analyzed using the
Autoregressive and Distributed Lag (ARDL) methodology. The result of the study indicated that:
Solar energy demand, hydropower energy demand, demand for natural gas and demand for coal
energy had significant impact on inclusive economic growth in Nigeria both in the short and long
run. Demand for petroleum energy had insignificant effect on inclusive growth in the long run but
significant impact on inclusive growth in the short run in Nigeria over the period of this study. Hence
the study concluded that energy demand has serious implications on inclusive economic growth in
Nigeria. Consequent upon these findings, the study recommends; improve infrastructure for natural
gas, coal energy, solar energy and the diversification of energy sources in order to improve
investment in the energy/power sector, create more jobs and reduce poverty in Nigeria.

Keywords: Energy demand; inclusive economic growth; solar energy; hydropower energy; petroleum
energy; natural gas energy and coal energy.

1. INTRODUCTION largest in the world, with a projected oil deposit of

roughly 36.2 billion barrels. The projected deposit
Nigeria is fortunate to have a variety of energy of coal and bitumen are roughly 2.7 billion
resources. The nation possesses one of the tonnes, while the proven gas deposit are
biggest crude oil resources in Africa and the sixth approximately 5,000 billion cubic metres. The
_____________________________________________________________________________________________________

*Corresponding author: Email: alwell.nteegah@uniport.edu.ng;

Asian J. Econ. Fin. Manage., vol. 5, no. 1, pp. 332-344, 2023

 Nteegah and Kumanwe; Asian J. Econ. Fin. Manage., vol. 5, no. 1, pp. 332-344, 2023; Article no.AJEFM.1379
nation's hydroelectricity facilities also have an
estimated 14,250 MW of capacity. Despite the
abundance of energy resources in Nigeria, there
exist a significant gap amid the country's energy
supply and demand during the last 20 years, and
access to energy services has also been a
constant challenge (Obinna in Olarinde and
Adeniran, 2018). In congruent with Damilola [1],
the failure to achieve the required efficiency in
the energy industry has resulted in a constant
decline in energy supply and an inability to
satisfy rising energy demands. The development
of the two energy markets, namely the petroleum
and power markets, is impacted by this issue.
The Power Holding Company of Nigeria and
related government entities have fallen short in
supplying enough and dependable electrical
supply to different sectors of the economy in light
of the electricity market crisis. The domestic
economy is the most impacted since most people
utilise more unorthodox alternative fuels like
wood fuel, charcoal, and other similar sources,
all of which pose ecological risks. To supplement
the erratic power supply from the national grid,
other industries that is, manufacturing, services,
and so forth invest extensively in electricity
generating facilities, which has an impact on their
profitability, return on outlay, and productivity.
The chronic and severe scarcities in the supply
of petroleum (PMS, diesel and kerosene)
products over the years, which are primarily
brought on by failing refineries, corruption, and
geopolitical conflicts in the Niger Delta area, are
among the other energy crises the nation is
currently facing in the petroleum sector. Indeed,
this problem has an adverse impact on the
economy of the nation and may primarily lead to
the high rates of poverty and unemployment
likewise the stagnant business and industrial
activities.
On the issue of energy demand and
development within the economy in Nigeria,
some examination has been done. However,
several information gaps have been revealed
owing to previous empirical examination, and this
work tries to fill these gaps in knowledge.
Regarding substance, none of the studies
divided energy demand into its many sectors or
made a connection amid energy demand and
inclusive development within the economy in
Nigeria. None of the associated examination
used data that extended up to 2020 in terms of
time. The goal of this paper is to objectively
analyse the impact of energy consumption on
inclusive economic growth in Nigeria, drawing on
the challenges and gaps that have been found.
333
Additionally, the demand for energy will be
broken down into its various energy sources, i.e.
renewable and non-renewable energy sources.
The study also employs time series data
spanning the years 1981 to 2020, making it more
current than earlier studies. We continue our
discussion by reviewing relevant literature and
present the methodology for employed to
achieved the purpose of the study. This is
followed by results of data analysis, findings and
concluding remarks.
2. LITERATURE REVIEW
The phrase "inclusive" growth may be traced
back to Kakwani and Pernia [2], and it is often
used synonymously with a number of other
phrases, including "broad-based growth,"
"shared growth," and "pro-poor growth." In
certain instances, pro-poor development is
emphasized in an effort to eliminate living
standard disparities by providing lower income
groups with larger income upsurges than the rest
of the population. Another strategy places a
strong focus on employment that is productive,
ensuring that employees benefit from upsurge
productivity likewise creating jobs to
accommodate the expanding population. But in
congruent with Paramasivan, Mani, and Utpal [3],
inclusive growth is now the dominant paradigm in
development economics, which previously
supported pro-poor growth. Broad-based and
inclusive growth emphasizes policies that
eliminate barriers to development and level the
playing field for outlay, as opposed to shared
growth, which might be misinterpreted as
emphasising income distribution plans.
Therefore, the key distinction amid inclusive
growth and the pro-poor strategy is that the
former is primarily concerned with the welfare of
the poor, while inclusive growth is focused on
opportunities for the majority of the labour force,
including both middle-class and impoverished
individuals. In spite of several efforts, there is no
single definition for the phrase, hence it is still
rather vague [4]. Development within the
economy that is inclusive of all people was
described by the Asian Development Bank in
2013. It is a sort of growth that, in addition to
creating new economic possibilities, also
guarantees that all societal sectors, especially
the poor, have equitable access to these
opportunities. Aiming to reduce absolute poverty,
the World Bank [5] defined inclusive
development within the economy as the rate and
pattern of growth that are connected and
evaluated jointly. It is implied by this definition,
 Nteegah and Kumanwe; Asian J. Econ. Fin. Manage., vol. 5, no. 1, pp. 332-344, 2023; Article no.AJEFM.1379
which takes a long-term approach, that macro
and micro factors in growth are closely related.
Additionally, the International Policy Centre for
Inclusive development (2016) emphasises
engagement so that individuals actively engage
in the wealth-creation process and have a voice
in how that process is directed, in addition to
participating in the benefits of development. In
congruent with Ali and Zhaung [6], inclusive
growth is growth that guarantees all members of
society, especially the weaker and more
marginalised groups, have equal access to the
possibilities offered by the growth likewise new
economic opportunities [6]. Therefore, improving
growth rates and expanding the economy's size
while levelling the playing field for outlay and
expanding chances for productive employment
constitute inclusive development within the
economy [7]. Raheem, Isah, and Adedeji [8]
further defined inclusive development within the
economy as a state in which the wage rate is
exceeding per capita income (GDP per capita)
and/or when growth within the economy is
followed by a decline in the poverty rate,
unemployment rate, and inequality gap. In other
words, ensuring that the most vulnerable
members of society are addressed is a key
component of inclusive development within the
economy, which goes beyond just boosting
national economies. There are many different
economic sectors that are included in the notion
of inclusive growth. Growth that includes equity,
equality of opportunity in terms of access to
markets, jobs, resources, and a regulatory
framework that creates a level playing field for
everyone. It is a growth process that prioritises
the poor's active involvement, generates new
possibilities for everyone, and guarantees
equitable access to those chances. Accordingly,
inclusive growth is a kind of development within
the economy that is interconnected and
evaluated as a whole with the goal of decreasing
poverty and enabling everyone to partake in the
wealth [4,9]. The fundamental principle of
inclusive development is that it must be equitable
in order to substantially lower the level of
poverty. Inclusive growth has been defined in a
variety of ways. It focuses on ensuring that
everyone, especially the poor, has access to the
economic possibilities brought about by
development. Even if upsurge material wealth is
an upshot of economic progress, it is not always
the case that this material prosperity is
distributed more fairly in society, which would
lead to an improvement in the way income is
distributed. Because of this, fair, broadly based
development across sectors is necessary for it to
334
be sustainable over time [10]. From the
foregoing, it could be deduced that inclusive
growth covers the issues of employment and
poverty reduction hence it is captured in this
study as: GDP per person employed.
Topolewski [11] conducted empirical examination
to support the link amid energy use and
economic expansion for the period 2008 to 2019.
34 European nations were included in the
analysis, 27 of which are presently EU members.
Dynamic panel models utilising the Arellano and
Bond and Blundell and Bond estimators are
among the examination techniques used for the
analysis. it was discovered that short-term output
upsurges would cause an energy usage rise that
is statistically substantial. More importantly, this
influence is statistically significant and good over
the long run. On the other hand, the study
discovered that, in the short run, upsurges in
energy usage do not affect the pace of growth
within the economy when taking into account the
second estimated models. Long-term
confirmation of this relationship is similarly
inconclusive. In conclusion, a one-way link amid
growth within the economy and energy usage
was shown to exist both in the short and long
run.
In another study to examine the relationship
between energy consumption and economic
growth in Nigeria, Abner, Izuchukwu, Eneoli, and
Udo [12] used the multidimensional framework
from 2000Q-12018Q4, the ARDL bounds test
approach, the Error Correction Model (ECM),
and the Clemente-Montanes-Reyes unit root for
structural breaks in the series. It was found that a
unit increase in energy consumption accelerates
economic growth by adding value to goods and
services; a unit decrease in electricity
consumption increases petroleum consumption
while slowing economic growth as a result of
distribution problems, an estimated billing
system, and an overreliance on generating sets
as a substitute. The non-causal relationship is
caused by the imbalance between energy supply
and demand. The study therefore recommended,
among other things, examining the billing
system, pricing structure, and regulations in
order to support and assure effective and
responsive energy distribution and maintenance
and to encourage value addition and economic
growth.
Ishioro [13] looked into the linkage amid energy
use and growth on the Nigerian economy. Crude
oil, gas, coal, electricity, and total energy usage
 Nteegah and Kumanwe; Asian J. Econ. Fin. Manage., vol. 5, no. 1, pp. 332-344, 2023; Article no.AJEFM.1379
were the five definitions of energy usage that
were chosen. Along with growth within the
economy, the study also considered capital
accumulation and labour force participation
utilising the Vector Auto-regression (VAR) model
and other estimate methods. The results
demonstrated that for each of the energy
components and growth variables, individual
shocks were more severe and that there was
evidence of shock substitutability, which means
that as individual shocks are lessened, shocks
ensuing from other variables become more
substantial. In some cases, shocks were
sinusoidal in nature. In congruent with the
appraisal, comprehensive policies for the
Nigerian economy's energy usage, capital
accumulation, labour participation, and growth
within the economy should be developed. In the
context of these policies, all the variables used in
the VAR models should be viewed as targets and
instruments of energy usage, capital
accumulation, labour participation, and growth
within the economy.
The impact of renewable energy usage on
economic development in Nigeria from 1990 to
2016 was explored by Ekone and
Amaghionyeodiwe [14]. It also examined the link
amid Nigeria's development within the economy
and the usage of renewable energy. This was
done in an effort to shed light on the linkage amid
the use of renewable energy and development
within the economy in Nigeria over the
appraisal's time frame. Both descriptive analysis
and econometric techniques, i.e. unit root,
correlation, co-integration, regression, and test of
Granger causality, were utilised to analyse the
data. The results demonstrated that although
development within the economy and renewable
energy usage both grew in Nigeria amid 1990
and 2016, there was no discernible correlation
amid the two. Furthermore, throughout the study
period, there was no correlation amid the use of
renewable energy and development within the
Nigeria’s economy. The study found that utilising
renewable energy has a negligible adverse effect
on Nigeria's economic growth. The report
proposed that outlays in renewable energy be
promoted and strengthened since this may be a
solution to fulfil rising energy demand without
raising domestic fuel usage, hence boosting fuel
exports and generating more revenue.
In a similar study on seven Sub-Saharan African
nations over the period 1970 and 2007, Esso [15]
examined the long-term and causal links amid
energy usage and development within their
335
economies. The study finds that energy usage is
co-integrated with development within the
economy in Cameroon, Cote d'Ivoire, Ghana,
Nigeria, and South Africa utilising the Gregory
and Hansen testing technique to threshold co-
integration. In congruent with the test,
development within the economy had a
considerable long-term beneficial influence on
energy usage in these nations until 1988, but
after 1988, in Ghana and South Africa, this effect
turns out to be adverse. Additionally, causality
studies indicated a one-way causal link amid real
GDP and energy use in Ghana and the Congo,
and a two-way link amid real GDP and energy
use in Cote d'Ivoire.
From 1970 to 2005, Odularu and Okonkwo [16]
examined the linkage amid energy use and the
Nigerian economy. Crude oil, electricity, and coal
were the three energy sources that were
employed to examine this link. The results
obtained by utilising the cointegration approach
suggest a favourable link amid present period
energy use and development within the
economy. There was an adverse correlation
between the lagged estimates of energy use and
development within the economy, with coal being
the only exception. The study concluded that
rising energy usage is a substantial predictor of
development within the economy in Nigeria, with
an implicit impact on lagged periods and both an
explicit and implicit impact on the current era.
Therefore, it is important that this sector be given
greater attention, even while possibilities to boost
development within the economy are being taken
advantage of.
The link between energy usage and economic
development within the economy in Nigeria from
1970 to 2005 was examined by Gbadebo,
Olusegun, and Chinedu in 2009 [17]. They
looked at crude oil, electricity, and coal as three
separate energy sources. The results illustrated
that there is a long-term positive relationship
between present period energy usage and real
GDP after utilising the cointegration approach.
The examination also found an adverse
correlation between real GDP, delayed electricity
usage, and crude oil prices. The study found that
energy use is a substantial predictor of
development within the economy, having both an
implicit and explicit impact on Nigeria's current
economy and a lagging influence in delayed
eras. Despite the prospects this industry offers to
boost development within the economy, the
study advised that it be given greater importance.
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Ongono [18] conducted a study on Cameroon's
energy use and economic performance. The
findings of the study demonstrated that there is
no Granger causal link amid electricity usage and
GDP in the primary sector and at the national
level. The results also shown that manufacturing
sector production drives power usage in the
secondary sector. In the tertiary sector,
production and power use are causally linked. In
congruent with the report, every strategy
intended to boost development and eradicate
poverty must pay close attention to energy
generation.
Umeh, Ochuba and Ugwo [19] examined “the
impact of energy consumption on economic
growth in Nigeria over a period of 1980 to 2017.
The specific objectives were to: investigate the
extent to which components of energy
consumption effect economic growth in Nigeria
and ascertain if there is long-term relationship
between components of energy consumption and
economic growth in Nigeria. Ex post facto
research method was the research design
adopted in the study. The methods of data
analysis were Augmented Dickey Fuller Unit
Root test statistic, Engle-Granger Co-integration
test, error-correction mechanism,
Heteroscedasticity White Test, Ramsey Reset
and Durbin-Watson test. The study concluded
that there is impact of energy consumption on
economics growth in Nigeria. The empirical result
showed that the coefficient of petroleum oil has
78% positive significant effect on Real Gross
Domestic Product (RGDP), Liquidified natural
gas (GAS) has 44% positive significant effect on
Real Gross Domestic Product (RGDP) and the
electricity (ELECT) has 20% positive insignificant
effect on Real Gross Domestic Product (RGDP).
The RGDP has no long-run relationship with
petroleum oil, Liquefied natural gas, and
electricity. Hence, the energy consumption has
no long-run relationship with economic growth.
This study therefore recommended that
companies in charge of oil refining and
transportation should increase petroleum supply
around the country by connecting the major
towns with petroleum pipelines. Nigeria
Government should also formulate policy that
encourages crude oil drilling”.
Egbichi, Abuh, Okafor, Godwin and Adedoyin
[20] empirically examined “the dynamic impact of
energy consumption on the growth of Nigerian
economy between 1986 and 2016 using
symmetrical autoregressive distributed lag model
336
approach. Findings from the study revealed that
electricity consumption has not had a significant
impact on the growth of the Nigerian economy.
Also, due to fluctuations in electricity supply, the
growth of Nigerian economy has been on the
decline. However, petroleum consumption was
discovered to have a significant impact on
economic growth in Nigeria; while gas
consumption was discovered to have no
significant impact on the growth of Nigeria
economy. This was attributed to gas flaring
activities and other environmental abuses that
had caused major Niger Delta crisis and
attendant consequences like pipeline
vandalization and hostage taking. Based on the
findings, the study recommended that
government should undertake a cogent approach
towards reforming the electricity supply sector as
it is paramount for the country’s quest for
industrialization”.
The review of literature done above revealed that
so much works has been done on energy usage
and economic performance both in Nigeria and
other parts of the world [17,15], Ekone and
Amaghionyeodiwe [14] among others. However,
the studies were less concerned about how
energy demanded/used by the various sectors of
the economy affect inclusive economic growth
measured in term of GDP per person employed
in Nigeria. This is the major gap this study seeks
to bridge.
3. METHODOLOGY
The theoretical framework for this study is built
on the endogenous growth theory as developed
by economists including Paul Romer and Robert
Lucas in the mid-1980s because of its relevance
to the present study. The theory predicts that the
economy can grow forever if it does not run out
of new ideas, technological advancement and
infrastructure (such as energy). However, the
model of this study is built on the analytical
developed by Ekone and Amaghionyeodiwe
[14] for the purpose of explaining and predicting
the effect of energy demand on inclusive
economic growth in Nigeria. Ekone and
Amaghionyeodiwe’s [14] parsimonious
regression model developed using the
confirmatory specification approach and
structured using the Ordinary Least Squares
(OLS) method was modified to accommodate
all the variables of this study. The modified
model in its structural form is specified as
follows:
 Nteegah and Kumanwe; Asian J. Econ. Fin. Manage., vol. 5, no. 1, pp. 332-344, 2023; Article no.AJEFM.1379

GDPPEt = f (  0 , DSEt 1 , DHEt2 , DPEt3 , DNGEt4 , DCEt5 ) (1)

To enhance proper estimation, equation 1 was expressed in a mathematical form by incorporating the
error term and parameters as follows:

ln GDPPEt = 0 + 1 ln DSEt + 2 ln DHEt + 3 ln DPEt + 4 ln DNGEt + 5 ln DCEt + t (2)

Apriori theoretical expectation: β1 > 0, β2 > 0, β3 > 0, β4 > 0, β5 > 0.

Where: Ln = natural logarithm, GDPPEt = GDP per person employed and proxy for inclusive growth
within the economy; DSEt = demand for solar energy; DHEt = demand for hydropower energy; DPEt =
demand for petroleum energy; DNGEt = demand for natural gas energy; DCEt = demand for coal
energy

β0 = intercept. β1 - β5 = parameter estimates of the independent variables; µt= disturbance or error term

3.1 Estimation Procedure

In order to avoid estimating spurious regression, the stochastic properties of the series were tested.
Several procedures for the test of order of integration have been developed but the Philip-Perron
technique was used in this study. In furtherance, the ARDL model was considered as the best
econometric method for this study since the variables have mixed stationarity with I(0) and I(1). Also,
the ARDL approach is appropriate for generating short-run and long-run elasticities for a moderate
sample size at the same time following the ordinary least square (OLS) approach for cointegration
between variables. Specifically, the ARDL equation for the variables under investigation is stated thus:

∆ln(𝐺𝐷𝑃𝑃𝐸𝑡 ) = ∑𝑛𝑖=1 α0 ∆1𝑛(𝐺𝐷𝑃𝑃𝐸𝑡−1 ) + ∑𝑛𝑖=1 α1 ∆1𝑛(𝐷𝑆𝐸𝑡−1 ) + ∑𝑛𝑖=1 α2 ∆1𝑛(𝐷𝐻𝐸𝑡−1 ) +

∑𝑛𝑡=1 α3 ∆1𝑛(𝐷𝑃𝐸𝑡−1 ) + ∑𝑛𝑡=1 α4 ∆1𝑛(𝐷𝑁𝐺𝐸𝑡−1 ) + ∑𝑛𝑡=1 α5 ∆1𝑛(𝐷𝐶𝐸𝑡−1 ) 𝛽0 ∆ln(𝐺𝐷𝑃𝑃𝐸𝑡−1 ) +
𝛽1 ∆ln(𝐷𝑆𝐸𝑡−1 ) + 𝛽2 ∆ln(𝐷𝐻𝐸𝑡−1 ) + 𝛽3 ∆ln(𝐷𝑃𝐸𝑡−1 ) + 𝛽4 ∆ln(𝐷𝑁𝐺𝐸𝑡−1 ) + 𝛽5 ∆ln(𝐷𝐶𝐸𝑡−1 ) + 𝑈𝑡 (3)

Where:
β1 – β5 = long-run multipliers; α1 – α5 = are coefficients of the short-run dynamic of the ARDL model, Ut
is serially uncorrelated stochastic term with zero mean and constant variance, and ∆ is the first
difference operator. Since the long-run relationship amongst the variables has been established, we
proceeded to estimate the long-run equation of poverty level thus:

𝐼𝑛𝐺𝐷𝑃𝑃𝐸𝑡 = 𝛽0 + 𝛽1 𝐼𝑛𝐷𝑆𝐸𝑡−1 + 𝛽2 𝐼𝑛𝐷𝐻𝐸𝑡−1 + 𝛽3 𝐼𝑛𝐷𝑃𝐸𝑡−1 + 𝛽4 𝐼𝑛𝐷𝑁𝐺𝐸𝑡−1 + 𝛽4 𝐼𝑛𝐷𝐶𝐸𝑡−1 + 𝜇𝑡 (4)

The Akaike Information Criterion (AIC) was used to determine the lag length of the ARDL model by
using a lag length of one (1) both for the regressors and regress. In estimating the short-run dynamics,
the ARDL error correction equation was formed thus:

∆ln(𝐺𝐷𝑃𝑃𝐸𝑡 ) = ∑𝑛𝑖=1 α0 ∆1𝑛(𝐺𝐷𝑃𝑃𝐸𝑡−1 ) + ∑𝑛𝑖=1 α1 ∆1𝑛(𝐷𝑆𝐸𝑡−1 ) + ∑𝑛𝑖=1 α2 ∆1𝑛(𝐷𝐻𝐸𝑡−1 ) +

∑𝑛𝑡=1 α3 ∆1𝑛(𝐷𝑃𝐸𝑡−1 ) + ∑𝑛𝑡=1 α4 ∆1𝑛(𝐷𝑁𝐺𝐸𝑡−1 ) + ∑𝑛𝑡=1 α5 ∆1𝑛(𝐷𝐶𝐸𝑡−1 ) + ∑𝑛𝑡=1 𝐸𝐶𝑀𝑡−1 + 𝑈𝑡 (5)

Where:
α1 – α5 = short-run parameters. ECM is the lagged error correction term estimated from the long-run
dynamics. It shows the adjustment in the coefficient, and it is usually negative and most times
statistically significant in order to confirm the existence of cointegration relationship.

4. RESULTS average energy demand of 88.81Terajoule and

The descriptive statistics result reported in Table
1 shows high level of instability in the variables
under study over time. With a mean of $13078.30
and standard deviation of $3789.43 in GDP per
person employed (purchasing power parity PPP),
standard deviation of 12.24 Terajoule in solar
energy demand, mean energy demand value of
6201.71GWH and standard deviation of
1002.16GWH in hydropower energy demand,
mean value of 16447.84 Terajoule and standard
deviation of 7145.08Terajoule in petroleum

337
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energy demand, mean value of 96561.19
Terajoule and standard deviation of 58300.26
Terajoule in natural gas energy demand, average
coal energy demand of 799.71Terajoule with
standard deviation of 487.11 Terajoule are clear
indication of vagaries in energy demand in
Nigeria over the period under study. Though
most scholars have attributed the low energy
demand in the country to low level of
industrialisation and production, the poor energy
infrastructure seem to explain the low level of
energy demand in Nigeria more. Our further
discussion shall reveal how this instability has
affected productivity especially inclusive
economic growth measured in term of GDP per
person employed in Nigeria over the period 1990
– 2021.
The unit root test result reported in Table 2
indicates that only demand for hydropower
energy was stationary at level i(0). However, the
unit root test carried out on the variables
indicates that GDP per person employed,
demand for solar energy, demand for petroleum
energy, demand for natural gas energy and
demand for coal energy were all stationary after
first differencing or i(1). This implies that they
have no unit root problem or became stationary
after first difference as reported in Table 2. The
evidence before us on the unit root test revealed
that the variables have mixed order of stationarity
hence the application of the Autoregressive and
Distributed lag (ARDL) methodology in the
analysis of data.
The ARDL bound test for cointegration reported
in Table 3 shows that the F-statistic of 4.415215
is greater than is the lower and upper bound at
the various critical levels of 10%, 5%, 2.5% and
1% respectively. This high F-statistic above the
critical level is a confirmation for long run
relationship between the dependent and
independent variables in the inclusive growth
equation.
The long run ARDL result reported in Table 4
indicates that demand for solar energy, demand
for natural gas energy and demand for coal
energy are positively and significantly related to
inclusive growth (GDP per person employed).
This implies that increases in solar energy
demand, natural gas demand and coal energy
demand stimulated employment and reduced
poverty in Nigeria when all the variables affecting
energy demand and inclusive growth are allowed
to change. This result is in tandem with economic
theory, and it shows that demand for solar
energy, natural gas energy and coal energy
have serious implication on inclusive growth in
Nigeria.

Table 1. Descriptive statistics

Statistic GDPPE ($) DSE(TJ) DHE(GWH) DPE(TJ) DNGE(TJ) DCE(TJ)

Mean 13078.30 88.81 6201.71 16447.84 96561.19 799.71
Median 12248.89 86.00 5909.00 17501.00 103229.0 826.00
Maximum 18760.85 147.00 8234.00 35127.00 175819.0 1566.00
Minimum 8926.64 76.00 4387.00 5150.00 30326.00 77.00
Std. Dev. 3789.43 12.24 1002.16 7145.08 58300.26 487.11
Skewness 0.35 3.63 0.62 0.54 0.13 -0.06
Kurtosis 1.51 17.76 2.74 3.09 1.30 1.55
Jarque-Bera 3.49 349.50 2.10 1.50 3.83 2.72
Probability 0.17 0.00 0.35 0.47 0.15 0.26
Sum 405427.4 2753.00 192253.0 509883.0 2993397. 24791.00
Sum Sq. Dev. 4.31E+08 4496.84 30129758 1.53E+09 1.02E+11 7118174.
Observations 31 31 31 31 31 31
Source: Authors’ Computation (E-view 12)

Table 2. Unit root test result using philip -perron method

Variable PP Statistic 1% 5% 10% Remark

Log(GDPPE) -3.26 -3.68 -2.97 -2.62 Stationary@ i(1)
Log(DHE) -3.44 -3.67 -2.96 -2.62 Stationary@ i(0)
Log(DSE) -8.07 -3.68 -2.97 -2.62 Stationary@i(1)
Log(DPE) -7.39 -3.68 -2.97 -2.62 Stationary@i(1)
Log(DNGE) -6.21 -3.68 -2.97 -2.62 Stationary@i(1)
Log(DCE) -8.21 -3.68 -2.97 -2.62 Stationary@i(1)
Source: Authors’ Computation (E-view 12)

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Table 3. ARDL bound test for inclusive growth model in Nigeria

F-Bounds Test Null Hypothesis: No levels relationship

Test Statistic Value Signif. I(0) I(1)
Asymptotic: n=1000
F-statistic 4.415215 10% 2.08 3
K 5 5% 2.39 3.38
2.5% 2.7 3.73
1% 3.06 4.15
Source: Source: Authors’ Computation (E-view 12)

Table 4. ARDL long run form result for inclusive growth model – ARDL(3, 2, 3, 3, 2, 3)

Variable Coefficient Std. Error t-Statistic Prob.

LOG(DSE) 0.382333 0.146888 2.602888 0.0405
LOG(DHE) -0.722629 0.096148 -7.515816 0.0003
LOG(DPE) -0.055679 0.033010 -1.686764 0.1426
LOG(DNGE) 0.334470 0.025074 13.33925 0.0000
LOG(DCE) 0.175012 0.026584 6.583374 0.0006
C 9.649340 0.820818 11.75576 0.0000
Source: Authors’ Computation (E-view 12)

Table 5. ARDL error correction regression for inclusive growth model - ARDL(3, 2, 3, 3, 2, 3)

Variable Coefficient Std. Error t-Statistic Prob.

DLOG(GDPPE(-1)) -0.161945 0.188741 -0.858027 0.4238
DLOG(GDPPE(-2)) -0.137400 0.101017 -1.360165 0.2227
DLOG(DSE) -0.333574 0.047122 -7.078870 0.0004
DLOG(DSE(-1)) -0.212890 0.046307 -4.597330 0.0037
DLOG(DHE) 0.210075 0.034090 6.162421 0.0008
DLOG(DHE(-1)) -0.415686 0.064889 -6.406134 0.0007
DLOG(DHE(-2)) -0.360745 0.053109 -6.792593 0.0005
DLOG(DPE) 0.013862 0.011878 1.167063 0.2875
DLOG(DPE(-1)) 0.055011 0.012983 4.237250 0.0055
DLOG(DPE(-2)) 0.024718 0.010471 2.360662 0.0562
DLOG(DNGE) -0.170812 0.021838 -7.821917 0.0002
DLOG(DNGE(-1)) 0.139930 0.019349 7.231964 0.0004
DLOG(DCE) -0.042529 0.008664 -4.908382 0.0027
DLOG(DCE(-1)) 0.111358 0.014196 7.844389 0.0002
DLOG(DCE(-2)) 0.054709 0.008697 6.290680 0.0008
CointEq(-1)* -1.005282 0.127864 7.862125 0.0002
R2 = 0.94; R2-adjusted = 0.86; Durbin Watson Statistic = 2.69
Source: Authors’ Computation (e-view 12)

The long run further reveals that demand for
hydropower energy has negative but significant
impact on inclusive economic growth. This
variable deviated significantly from aprori
theoretical expectation and economic theory. The
poor hydropower infrastructure and the vagaries
of weather which usually affect hydropower
energy in Nigeria may have accounted for this
result.
Demand for petroleum energy contrary to
expectation has negative and insignificant
relationship with inclusive economic growth. This
implies that increase in petroleum energy
demand retarded job creation and poverty
reduction in Nigeria. The low value chain that
characterised the petroleum sector due to low
investment and utilisation of petroleum energy
may have accounted for this result.
The ARDL Error Correction model result /short
run result reported in Table 5 shows that in the
short solar energy demand has negative but
significant relationship with inclusive economic
growth in Nigeria. This implies that in the short
run (when other factors affecting inclusive growth
are held constant), demand for solar energy
retarded inclusive economic growth (reduced job

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 Nteegah and Kumanwe; Asian J. Econ. Fin. Manage., vol. 5, no. 1, pp. 332-344, 2023; Article no.AJEFM.1379
creation and increase poverty) significantly in
Nigeria. This result is not in agreement with
economic theory. The low level of investment in
solar energy infrastructure may have accounted
for this result.
Hydropower energy demand has serious
implication on inclusive economic growth in the
short run. Though it is negatively related to
inclusive economic growth at lags 1 and 2, at
level it is positively related to inclusive economic
growth. The mix effect of this variable on
inclusive economic growth could be traced low
level of investment in hydropower energy in the
country.
Demand for petroleum energy has positive and
significant impact on inclusive economic growth
in the short run. This implies that increases in
demand for petroleum energy stimulated job
creation and reduced poverty in the short run in
Nigeria. Petroleum energy (AGO, PMS and DPK)
has remain the most used energy source in
Nigeria since the discovery of petroleum in the
country in the late 1950s. thus increase demand
for petroleum energy for transport, household use
and industrial purpose could stimulate additional
jobs and reduced poverty in Nigeria.
4.1 Model Stability Test Result
.08
.06
.04
.02
.00
-.02
-.04
-.06
-.08
2016 2017 2018
Recursive Residuals
Fig. 1. Recursive residuals test
340
Demand for natural gas energy has both negative
and positive impact on inclusive economic growth
in Nigeria. Though the effect is significant, at
level it is negative but positive at lag 1. This result
revealed the critical nature of natural gas as a
veritable source of energy in Nigeria and the
global economy.
Demand for coal energy is positively and
significantly related to inclusive economic growth
in Nigeria. This result implies that coal energy
demand has serious positive implication on job
creation and poverty reduction in Nigeria in the
short run. Nigeria has huge deposit of coal and
has used coal as a major energy source
especially for electricity generation and
locomotive train (transportation) over the years.
This development may have explained the
outcome of our analysis.
The Error Correction Mechanism (ECM) shows
that energy demand adjusts speedily to long run
changes in inclusive economic growth in Nigeria
given the negative sign of the ECM coefficient
and its significance at 5 percent level. Also, the
R2 value indicates that energy demand accounts
for about 94 percent variation in inclusive
economic growth (employment and poverty
reduction) in Nigeria.
2019 2020 2021
± 2 S.E.
 Nteegah and Kumanwe; Asian J. Econ. Fin. Manage., vol. 5, no. 1, pp. 332-344, 2023; Article no.AJEFM.1379

8
6
4
2
0
-2
-4
-6
-8
2016 2017 2018 2019 2020 2021

CUSUM 5% Significance

Fig. 2. CUSUM test

1.6

1.2

0.8

0.4

0.0

-0.4
2016 2017 2018 2019 2020 2021

CUSUM of Squares 5% Significance

Fig. 3. CUSUM of Squares

In testing the stability of the long-run coefficients
with the short-run dynamics, the Recursive
Residual, cumulative sum (CUSUM) and CUSUM
of squares were used. As shown in Figs. 1, 2 and
3, the Recursive Residual, CUSUM and CUSUM
of squares lines stayed within the 5 percent
critical bound. Thus, neither the Recursive
Residual, CUSUM nor CUSUM of squares plots
across the 5 percent critical lines, hence, these
statistics prove the stability of the long-run
coefficients of the regressors that influence
inclusive economic growth in Nigeria. Therefore,
the results of the model of the impact of
energy demand on inclusive economic growth
in Nigeria show the existence of parameter
stability.

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 Nteegah and Kumanwe; Asian J. Econ. Fin. Manage., vol. 5, no. 1, pp. 332-344, 2023; Article no.AJEFM.1379
Table 6. Model diagnostic/post estimation test result
Diagnostic test
Jarque-Bera test for normality
Bresch-Gofrey serial correlation LM test
Bresch –Pagan-Godfrey Heteroskedasticity test
Ramsey RESET test for specification error
Source: Authors’ Computation (e-view 12)
The results of the diagnostic tests were shown in
Table 6. The serial correlation of the residuals
was tested using Breuch Godfrey test or
Lagrange Multiplier (LM). The null hypothesis of
no serial correlation was retained because the
probability value of 0.39 was greater than the 5
percent level of significance. Thus, there was
sufficient statistical evidence to conclude that
there was absence of serial correlation in our
model. In furtherance, the probability value of
0.46 against the Ramsey Regression Equation
Specification Error Test (RESET) test was
greater than the proposed 5 per cent level of
significance. As a result, the null hypothesis that
the model was correctly specified was sustained.
Therefore, there was no possibility of the model
being specified incorrectly which may result in the
omission of certain variables. Again, the model
has no wrong functional form. Besides, there was
no relationship between the explanatory variables
and the residuals. In furtherance, under the
Jarque-Bera normality test, a probability value of
0.00 was less than the proposed level of
significance and this suggests that the errors
were not normally distributed due to the rejection
of the null hypothesis of normal distribution.
Lastly, the result of the ARCH test showed that
there was no heteroscedasticity in our model.
This is because we retained the null hypothesis
of homoscedasticity. Thus, a probability value of
0.99 showed that the errors were homoscedastic
and independent of the explanatory variables.
Hence, the model has a good fit and is adequate
for analysis and any conclusion drawn from it.
5. DISCUSSION OF FINDINGS
Both long run and short run result on demand for
solar energy indicates a significant relationship
between solar energy demand and inclusive
growth. Though its impact is positive in the long
run the short run result is negative. The long run
result shows that solar energy demand has
positive and significant effect on inclusive
economic growth in Nigeria. This implies that
investment in solar energy and consumption
stimulated job creation and reduced poverty in
the long run than in the short run. This result
342
F-statistic Probability
14.25 0.00
1.19 0.39
0.24 0.99
0.64 0.46
deviated from early study by Ekone and
Amaghionyeodiwe [14] that found no significant
relationship between renewable energy demand
and growth of the Nigeria’s economy
Demand for hydropower has negative effect on
inclusive growth in the long run and both negative
and positive effect on inclusive growth in the
short run. Though the impact hydropower on
inclusive growth is significant in both long and
short run, the result implies that hydropower has
serious negative implication on job creation and
poverty reduction in Nigeria over the period of
this study.
Demand for petroleum has negative and
insignificant impact on inclusive economic growth
in the long run but positive and significant effect
on inclusive growth in the short run. This implies
that petroleum energy demand retarded job
creation and fuels poverty in long run but
stimulated inclusive growth in the short run. The
short run result agrees with earlier study by
Egbichi et al. [20] and Umeh, Ochuba and Ugwo
[19] which found positive relationship between
petroleum energy demand and real economic
growth in Nigeria. Nigeria is a producer and
major consumer of petroleum energy. This
development has serious implication on the
economy. However, the country imports refined
petroleum products hence has less value addition
from petroleum energy.
Natural gas energy demand has positive and
significant impact on inclusive in the long run but
mix effect (positive and negative) on inclusive
economic growth in the short run. This implies
that in the long run natural gas energy demand
stimulated jobs and reduced poverty than in the
short run. This result is not in tandem with the
works of Umeh, Ochuba and Ugwo [19] and
Egbichi et al. [20] that reported insignificant
relationship between natural gas consumption
and economic growth in Nigeria. Natural gas has
become a veritable source of input for electricity
generation in Nigeria thus has a high potential
for job creation and poverty reduction in the
country.
 Nteegah and Kumanwe; Asian J. Econ. Fin. Manage., vol. 5, no. 1, pp. 332-344, 2023; Article no.AJEFM.1379
Demand for coal energy complies with apriori
expectation in the long run with a positive
coefficient though it has mix effect on inclusive
economic growth in the short run. This implies
that demand for coal energy spurred job creation
and reduced poverty in Nigeria in the long run
and short run. This result agrees with earlier
study by Odularu and Okonkwo [16] which
reported a positive and significant relationship
between coal energy demand and economic
growth in Nigeria.
the high speed of adjustment of energy demand
to long run dynamics in inclusive economic
growth and the high coefficient of determination
show that energy demand/consumption has
serious implication on job creation and poverty
reduction in Nigeria over the period of this study.
Hence from the results, the study rejects the null
hypotheses of no significant relationship between
inclusive economic growth, demand for solar
energy, demand for hydropower energy, demand
for petroleum energy, demand for natural gas
energy and demand for coal energy in Nigeria
[21-23].
6. CONCLUSION
This study examined the effect of energy demand
on inclusive economic growth proxy by Gross
domestic product per person employed in Nigeria
over the period 1990 – 2021 using the ARDL
methodology. The findings show that energy
demand has serious implications on inclusive
economic growth in Nigeria. Hence the study
concludes that: (i) Solar energy demand,
hydropower energy demand, demand for natural
gas and demand for coal energy have significant
impact on inclusive economic growth in Nigeria
both in the short and long run. (ii)Demand for
petroleum energy has insignificant effect on
inclusive growth in the long run but significant
impact on inclusive growth in the short run in
Nigeria over the period of this study. Consequent
upon the conclusion, the study, recommended
the following: (a) improve availability of natural
gas in Nigeria: the result revealed a positive and
significant impact of demand for natural gas on
inclusive growth in Nigeria both in the short and
long run. This calls for the improve infrastructure
for the utilization of natural gas in Nigeria. An
improve natural gas supply for power generation
will boost power supply, increase investment and
economic activities thereby stimulating job
creation and reduction in unemployment in the
country. (b) Government should invest in clean
coal mining technology and utilization. This will
improve sources of energy and ensure the
343
utilization of coal energy especially in transport.
This may further reduce the pressure on
petroleum energy and cost of production which is
key to job creation and poverty reduction. (c)
Government should institute policies that will
enhance the diversification of energy sources in
Nigeria. This will increase energy supply and
enhance competition in the energy sub sector. An
increase competition in the energy sector will
promote investment, create jobs and improve
economic performance in Nigeria.
COMPETING INTERESTS
Authors have declared that no competing
interests exist.
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