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Energy Consumption and Foreign Direct Investment in Nigeria: A Structural Break Analysis

Author

Listed:
  • Longe Adedayo Emmanuel

    (Centre for Petroleum, Energy Economics and Law, University of Ibadan, Ibadan, Oyo State, Nigeria)

  • Adebayo Emmanuel Olajide

    (Economics Programme, College of Social and Management Sciences, Bowen University, Iwo, Osun State, Nigeria)

  • Muhammad Shehu

    (Department of Social Sciences, Federal Polytechnic, Bida. Niger State, Nigeria)

  • Adelokun Oluwole Oluniyi

    (Centre for Petroleum, Energy Economics and Law, University of Ibadan, Ibadan, Oyo State, Nigeria)

Abstract

The study analyses the structural break impact on the relationship between energy consumption and foreign direct investment in Nigeria from 1970 to 2015. The study accounts for the structural break and estimates the short-run and long-run relationship between energy consumption and foreign direct investment using ARDL estimation technique and Bai-Perron Least Squares Break Point. It was observed from the findings that a strong long-run cointegrating relationship exist between energy consumption and foreign direct investment with and without structural break. The structural break test reveals a break period of 1995 which supports the occurrence of oil price review by OPEC in 1995. Also, the ARDL estimate result revealed that energy consumption, trade and exchange rate adversely attract foreign direct investment, while GDP positively attract foreign direct investment both in the short-run and long-run in Nigeria. The study concludes that even though Nigeria’s GDP is trending towards attracting FDI into the economy, energy consumption, trade and exchange rate obstruct the attraction through the additional cost incurred as a result of imbalances in the variables. A major recommendation from the findings is that energy policies need quick re-visit in Nigeria. However, they will - due to the pressure exerted by the constant growth of the population, i.e. on the demand side, demand inflation will constantly manifest.

Suggested Citation

  • Longe Adedayo Emmanuel & Adebayo Emmanuel Olajide & Muhammad Shehu & Adelokun Oluwole Oluniyi, 2020. "Energy Consumption and Foreign Direct Investment in Nigeria: A Structural Break Analysis," Economic Themes, Sciendo, vol. 58(2), pages 187-201, June.
    • Handle: RePEc:vrs:ecothe:v:58:y:2020:i:2:p:187-201:n:3
    DOI: 10.2478/ethemes-2020-0011
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    References listed on IDEAS

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    More about this item

    Keywords

    Energy Consumption; FDI; ARDL; Bai-Perron test;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • N7 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services

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