Renewable Energy Consumption, Oil Price and Level of Economic Growth in Nigeria: A Non-Linear Autoregressive Distributed Lag Approach

Abstract

This paper analyze the causal relationship between renewable energy consumption, oil price and level of economic growth, using a non-linear auto regressive distributed lag approach for the period 1988–2020. The study revealed that renewable energy is by far the cleanest source of energy available. Findings of the study showed that oil price has significant and positive impact on economic growth in Nigeria, in the short-run and long run. Furthermore, results from the study showed that in the short and long run, renewable energy consumption has a positive but insignificant impact on the primary and tertiary sectors, whereas it has a negative and significant impact on the secondary sector. The study revealed that a percentage increase in oil price, all else constant, will significantly bring about 0.0697, 0.0887 and 0.0363 percentage increase in the short-run and 0.2283, 0.9610 and 0.7084 percentage increase in the long-run for the primary, secondary and tertiary sectors, respectively. Result of the study further revealed that in the long-run, a percentage rise in renewable energy consumption will bring about 1.0587, 0.2360 and 0.9365 percentage increase in the primary, secondary and tertiary sectors, respectively ceteris paribus. The study therefore recommends that the Nigerian government subsidizes renewable energy to enable it promote all levels of economic growth. Likewise, diversification policies should be adhered to in order to prevent the negative impact of fall in oil price on economic growth in Nigeria.