Electricity Infrastructure and Domestic Private Investment: Evidence from ECOWAS Countries

Abstract

The purpose of this study is to investigate the effect of electricity infrastructure on domestic private investment among ECOWAS member countries covering the timeframe 1999-2023. The data was sourced for the variables from the publications of the World Bank World Development Indicator (WDI). The study employed the Pooled Mean Group estimator and the Dumitrescu and Hurlin Granger causality test. The IPS panel unit root test shows that the variables are in mixed order of integration. The result of the long run estimates shows that electricity infrastructure has a positive and significant relationship with domestic private investment. In the short run, the results indicate that electricity infrastructure is negative and significant, implying that increase in electricity infrastructure is associated to decreases in domestic private investment. The Granger Causality test results show that electricity infrastructure can predict changes in the level of domestic private investment and not vice-versa. In the short-run, policy action should be about enabling regulatory frameworks for decentralized renewable energy (solar mini-grids, captive power) with streamlined licensing and financing mechanisms. This impacts by expanding power access in rural and peri-urban areas, fostering micro, small, and medium enterprise development. In the long run, priority should be given to electricity provision in key economic corridors and industrial zones.