Growth-led energy hypothesis in Nigeria: An asymmetric investigation

Abstract

The main goal of this study is to contribute to the ongoing empirical discourse by considering the possibility of an asymmetric connection between economic growth and energy consumption in Nigeria. Applying the Non-linear Autoregressive Distributed Lag (NARDL) approach on annual data from the period 1971 to 2018, the findings suggest that there is a significant asymmetric effect of economic growth on energy consumption in the long-run using the bounds test. Furthermore, the effects of negative and positive shocks to economic growth vary in both the long-run and short-run. More specifically, a positive shock to economic growth affect energy consumption negatively in the short-run but positively in the long-run while a negative shock to economic growth has a significant positive effect on energy consumption in the short-run and insignificant positive effect in the long-run. The result of this study also indicates that foreign direct investment has a negative effect on energy consumption in both the long and short-run, while capital has a contradictory effect on energy consumption in both periods. This study concludes that economic growth has a non-linear effect on energy consumption in both the short and long-run.