IMPACT OF POWER GENERATION ON ECONOMIC GROWTH.
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IMPACT OF POWER GENERATION ON ECONOMIC GROWTH.
Chapter one
INTRODUCTION
1.1 Background for the Study
Since the beginning of time, humans have sought power both individually and collectively. Power to change and make things happen. The term “power” in this document refers to electricity or electric power.
Power is crucial for national economic growth and development. Its usage are intimately tied to good economic growth.Kaseke and Hosking, (2013).
Nigeria is one of the most populous countries in the world, particularly in Africa; however, approximately 40% of the country is not connected to the national power grid, and for the 60% that are connected
the power supply is marred by regular and prolonged outages, as well as low voltages, which do more harm than good. Aliyu, Ramila, and Saleh (2013).
Aliyu, Ramila, and Saleh (2013) claimed that these outages, caused by inefficient power generation and supply, had a debilitating effect on the industrial sector.
When electricity fails, work and production come to a halt, labour hours are lost, and because labour is perishable, any labour power withheld is lost and cannot be recovered, so a loss of power affects productivity and efficiency in the industrial sector.
Although Nigeria has abundant human and material resources, its economic and political progress has been beset by problems since its independence in 1960.
Hunger, inflation, budget deficits, debt overhang, street begging, prostitution, fraud, high crime rates in major cities, collapse of manufacturing industries, corruption in public service, stagnation in entrepreneurial development, and epileptic power supply are all indicators of the Nigerian State’s failure (Fadeyi & Adisa, 2012).
Nigeria’s energy sector is undoubtedly in crisis due to a lack of development caused by bad handling and mismanagement of the energy sector; also, external forces such as vandalism have had a negative impact on the sector.
Nigerians who live near oil and natural gas reserves frequently vandalise oil pipelines and steal oil because they believe it is their due to share in the oil produced in their region, and the government, in their perspective, is not showing them the benefits of being from the region.
In Nigeria, a lack of appropriate power and a gap in power supply leads to excessive use of generators for power/electricity generation.
The current administration of President Buhari, through Vice President Osibanjo, assessed Nigeria’s power generation capacity to be more than 7000MW at the 23rd Nigerian Economic Summit.
Nigeria’s electricity sector was a governmental monopoly known as the National Electric electricity Authority (NEPA) for several decades before 2005.
NEPA oversaw energy transmission, generation, and distribution infrastructure, as well as all of the issues that come with a public monopoly. Because of this overcentralization, energy supplies could not keep up with population expansion and economic activity. In 2005, the government’s efforts to revitalise the power sector included privatisation.
They proposed to privatise NEPA under the moniker PHCN (Power Holding Company of Nigeria). They sought to transfer NEPA’s assets and liabilities to PHCN.
Nigeria has the world’s largest electrical demand-supply mismatch, delivering less than 4000 megawatts of electricity to its population of over 190 million.
South Africa, which has a population of over 55 million people, generates more over 40,000 megawatts, whilst Brazil, a developing economy similar to Nigeria, generates more than 100,000 megawatts for its 201 million citizensFG (2013).
Indeed, the electricity sector imbalance has far-reaching repercussions for Nigeria’s business climate, economic growth, and social well-being. Approximately 45 percent of the population has access to electricity, but only roughly 30 percent of their power needs are supplied.
The electricity sector is plagued by recurring outages, to the point where over 90% of industrial customers, as well as a considerable number of residential and other non-residential customers, generate their own power at a high cost to themselves and the Nigerian economy.
The Association of Power Generation Companies (APGC) claims to have an installed capacity of 12,000 megawatts and an available capacity of 8,000 megawatts, however only 4,500 megawatts can be transmitted via the grid, with approximately 1,500 megawatts available for electricity generation.
At 125 kWh per capita, Nigeria has one of the lowest electricity consumption rates in the world (AFDB, 2009).Nigeria now employs four distinct types of energy sources to generate power: hydro, natural gas, oil, and coal. Aliyu, Ramila, and Saleh (2013).
The power industry, on the other hand, is strongly reliant on the usage of petroleum to generate electricity, which has hampered the rise of alternate types of energy such as wind and solar energy, solidifying Nigeria’s status as a mono-economy.
Three out of four of Nigeria’s energy production resources are associated with greenhouse gas emissions, indicating that the country is not keeping up with the times and requires extreme radicalization of the power industry.
Nigeria is endowed with tremendous energy resources, yet it suffers from an ongoing energy crisis that has proven difficult to resolve. The “resource curse” or ‘Dutch illness’ refers to the coexistence of enormous wealth in natural resources and great personal poverty. Auty (1993) describes the Nigerian burden.
The Gross National Income per capita is $1,190, and the country ranks 162 out of 213 in the World Development Index in 2009. Nigeria’s GDP per capita increased by 132% between independence in 1960 and 1969, reaching a peak of 283% between 1970 and 1979.
The severity of this prompted an economic reorganisation in 1986. During the period of structural economic adjustment and liberalisation from 1988 to 1997, the GDP responded to economic adjustment policies and increased at a positive rate of 4%. In 2006, the real GDP grew by 7%. The real GDP increased by 7.87% in 2010.National Bureau of Statistics (2017).
Power consumption (KW) in the United States, Japan, South Africa, China, India, and Nigeria were 3,913, 934, 212, 5,523, 973, and 24 correspondingly in 2014, roughly corresponding to the nations’ GDP per capita (World Factbook, 2014).
Nigeria’s energy resources, mainly oil, are exported to other countries while its economy faces significant shortages of the same commodities. This is evidenced by the restricted and often unpredictable supply of electricity and the scarcity of most petroleum items.
According to the literature review, the bulk of research conducted to investigate the relationship between power generation and economic growth focus on either assessing the function of energy in driving economic growth or determining the direction of causality between these two variables.
Although the positive impact of energy infrastructure on economic growth is widely acknowledged, there are significant methodological concerns concerning the findings of these research. Some authors have employed panel data analysis and multivariate models.
It should be highlighted that the majority of these research yielded disparate results, and there is no consensus on the existence and direction of correlation between energy use and economic growth.
This study seeks to determine the relationship between power generation and economic growth by using electricity output and GDP as proxies. The goal is to determine whether different energy sources have varying effects on economic growth.
1.2 Statement of the Research Problem
In the twenty-first century, power/electricity is something that cannot be lived without. In any place or region where there is a lack of power, economic activities cease, and in those that do not, they become more expensive, raising the cost of manufacturing and consequently the overall price of goods and services.
The subject of electricity supply is closely monitored by national and international observers, and it has long been exploited politically as a means of gaining votes, with political candidates constantly pledging a stable power supply.
For industrialists, the problem of electricity supply is closely followed because it determines their desire to invest in the country. As a result, electricity generation has become one of Nigeria’s most sensitive topics, particularly since the power industry underwent significant changes between 1980 and 2017.
This research study intends to emphasise any relationship between power generation and economic growth, and so alleviate the problem of slow growth in the Nigerian economy through more stable and reliable power generation.
1.3 Research Questions.
The research questions that this study will seek to solve are as follows.
1. How does power generation effect economic growth?
2. How much power is generated in the country?
3. What are the challenges to power generation in Nigeria?
4. What efforts can be made to increase the country’s power supply, thereby boosting its economy?
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