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Energy Consumption and Inflation Dynamics in Nigeria: An ARDL Cointegration Approach

Author

Listed:
  • Godwin Edet Bassey

    (Department of Economics, Faculty of Social Sciences, University of Uyo, Uyo, Akwa Ibom State, Nigeria.)

  • Uduak Michael Ekong

    (Department of Economics, Faculty of Social Sciences, University of Uyo, Uyo, Akwa Ibom State, Nigeria.)

Abstract

This paper investigated the dynamic relationship between energy consumption and inflation in Nigeria using time series data obtained for the period 1980 to 2017. Applying Autoregressive Distributed Lag (ADL) technique on the variables, the study found that Premium Motor Spirit (PMS), Dual Purpose Kerosene (DPK) and Natural gas were noninflationary in Nigeria both in consumption and prices over the period. Also, Automotive Gas Oil (AGO) consumption produces strong evidence of positive inflationary pressure but not in prices throughout the study period. Further, we found a strong causality link between natural gas consumption and inflation in Nigeria. We concluded that inflation in Nigeria is not majorly a demand-pull phenomenon, pulled by energy consumption. We provide both subjective and evidence-based reasons for the economic trend and recommend a bridge in the degrading systemic informality in the energy sector that will deliver real time effect of energy consumption-inflation proposition in Nigeria.

Suggested Citation

  • Godwin Edet Bassey & Uduak Michael Ekong, 2019. "Energy Consumption and Inflation Dynamics in Nigeria: An ARDL Cointegration Approach," Energy Economics Letters, Asian Economic and Social Society, vol. 6(2), pages 66-83, December.
  • Handle: RePEc:asi:eneclt:2019:p:66-83
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Energy consumption; Petroleum energy consumption; Inflation dynamics; Demand-pull; ADL; Energy prices; Petroleum sector; Nigeria.;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • P18 - Economic Systems - - Capitalist Systems - - - Energy; Environment

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