The effect of electricity and gas losses on Nigeria`s Gross Domestic Product

Abstract

Electricity and gas are key factor inputs that could reduce or increase economic activity over time. The conversion, transmission, and distribution process of electricity and gas could increase or reduce output. This study investigated the effect of electricity and gas losses on the Gross Domestic Product (GDP) of Nigeria from the period covering 1970 to 2012. The objective of the study is to examine the impact of Electricity and gas losses on GDP of Nigeria using the ordinary least squares method. Results show that gas loss was in line with the ‘a priori’ expectation while electricity loss was not in both short and long run. Hence, gas loss showed an inverse relationship with GDP while electricity loss showed a direct relationship. Further, electricity loss was significant in explaining variations in GDP while gas loss is insignificant. The model will return to equilibrium at the speed of 29 per cent as revealed by the error correction test. The study concludes that a reduction in electricity and gas loss will increase productive activity and GDP. The paper recommends a reinforced policy on gas loss via flaring to reduce the quantity of gas loss. In the same vein, investment in modern technology in the power sector will in no small measure reduce power transmission and distribution losses.

Keywords: Electricity loss, Gas loss, Gross Domestic Product1.0 Introduction