Power Supply Failure on Nigeria Economy 1981-2016



1.1 Background of the Study

Government all over the world  and at level have one time or the other make one policy or the other towards the development and power supply of energy in their country, this stem from the fact that energy is one if not the greatest leading factor that drive any economy to substantial growth and development.  Gbadebo and Chinedu(2009) energy is the indispensable force driving all economic activities. In other words, the greater the energy consumption, the more the economic activity in the nation and as a result a greater economy emerges.   In the word of Noko (2009) electricity is the driving engine of any economy of the world.

However, power failures on the other hand serve as a deterrent to economic growth of any nation. These stem from the facts that power outage will cause a lot of damages to the household and the industries whose activities will be limited due to non-availability of regular power to power the equipment and machine used in the process of production Gbadebo and Chinedu (2009).

Today, Nigeria is seen as one of the fastest growing and in particular the largest economy in Africa with highly endowed natural resources including potential energy resources. This upsurge movement in the economic growth of the country, own to the development of the telecommunication sector and the service sector. However the energy sector in particular electricity supply has not yielded much in the development of the country potentials. Increasing the supply of power in Nigeria has proved to be not only a continuous challenge but a pressing issue with the international community.

Economic growth is a prerequisite for a nation to move from a third world country to a developed country. For developing country like Nigeria, the greater the economic growth the better her chances of becoming a developed economy.  With adequate and efficient utilization of energy potentials to meet the demand of a nation, the nation would experience high levels of economic growth.

However, there seems to be a downturn in the economy. This is because, for many years now, Nigeria has been facing an extreme shortage of electricity. This deficiency is multi-faceted, with causes that are financial, structural and socio-political, none of which are mutually exclusive. Nigeria’s power sector has high energy losses from generation to billing a low collection rate and low access to electricity by the population. There is insufficient cash generation because of these deficiencies and the power sector is consequently reliant on fuel subsidies and funding of capital projects by the government. At present, only 10% of rural households and 40% of the country’s total population have access to electricity.

There is therefore, need for regular power supply in the country since it is a leading factor towards achieving economic growth. Energy efficiency does not just connote a reduction in utility cost but it involves increasing revenue through greater productivity. Ovieniuwo (2006) agrees that “energy efficiency is the indispensable component of any effort to improve productivity” and of course it contribute to economic wealth. Majority of Nigerian are dependent on fossil fuel and fuel wood (firewood). Over dependence on fossils and fuel wood (used mainly by poor rural commuters) have not yielded enough capacity to meet increasing demands for power in the country.

However, a lot has equally been said with regards to the appalling state of Nigeria’s epileptic power sector. According to Akuru and Okoro (2011), energy consumers do not get electricity supplied to them because the local utility companies do not get power transmitted to them from the power grid. The managers of electric transmission are quick to accuse the generating stations of insufficient generating Mega-Watt (MW) capacity. And as if trading of blames has become routine with each of these sectors, the generating stations either claim they do not get enough gas to power their plants or they turn around and claim that the transmission companies themselves cannot boast of a strong transmission backbone to transmit what is being generated.

Indeed, power failure has a very substantial effect on the economic growth of Nigeria. A number of Issues can affect the development of Small-Medium Enterprises (SME) such as gross undercapitalization, decrepit infrastructural services, high start-up costs, corruption, government indifference, above all is power outage Oboh (2005 as cited in Gbadebo (2009). A particular finding revealed the high cost of providing back-up energy (partly infrastructural) for SMEs which sometimes is as critical as three times the cost of publicly supplied electricity as discussed elsewhere.

It is interesting to note that, energy consumption of any nation aid their economic growth and development. A steady supply of electricity and other energy to the industries increase their output and lower their operating cost which facilitates economic growth and development of such nation. The World Bank is committed to achieving the Millennium Development Goals of having global poverty eradication by 2015 and a stable power supply as well. As the international community measures its progress toward that goal, it must have solid and credible statistics that show where we are advancing and where we are falling behind (Joseph and Adebayo, 2012)

In Nigeria power sector is yet to meet expectation and demands of the masses due to inadequate infrastructural development, lack of skilled manpower of this sector resulting to regular power outage. This regular power failure of the electricity hinders economic growth and development in Nigeria economy in many different ways (Noko, 2009).

It is interesting to note that,  due to this erratic situation of power supply in Nigeria many firms has shut down their plants due to high operating cost resulting from the use of generator to power their plant and offices. The resultant effect of this power failure is it’s hazardous to human health. And many lives have been lost as a result of carbon-monoxide that erupts from the generator sets.

Consequently, in view of the compounding problem of electricity generation in Nigeria, especially in last decade, this work aims at examining the impact of power failure on the economic growth of Nigeria for the period under review.

1.2 Statement of the Problem

The impact of power supply failure on the Nigeria economic growth cannot be overemphasised, starting from its effect on the household, industry and the economy at large. The epileptic power supply is crippling Nigeria industries both great and small, raising the cost of production and the inflation rate of the country is on the move because of the power supply failure. The impact of power failure can be measured on the household, firms and the economy in general. Power failure impacts on the household in various ways. Its impact varies from the experience of dark night to a lot of damages being caused to household requirements. Many households have their appliances and equipment’s damaged due to frequent power failures. Also, what the household would have purchased in bulk (perishable goods) and kept in refrigerators is bought in bits for the fear of damaging due to power outage (Joseph and Adebayo, 2012).

Small and medium sized enterprises are not left out. By virtue of their size, small and medium sized enterprises are at the receiving end with regards to power outages. Artisans running businesses such as welding, steel fabrication, aluminium, hair dressing saloon and frozen food businesses would hardly survive without adequate power supply.

Industries are equally not left out, as most of their business activities are often restricted by the incessant power failure in the economy. The industry use energy for various reasons, which in turn affect in one way or the other the economic growth of the nation.  Their consumption of electricity ranges from usage as a source of light in the office to usage in cold rooms for selling perishable things. Some use computers and electric typewriters to transact their business. When there is epileptic power supply, these cannot be used and it may even cause damages to both their wares and the equipment’s. Big commercial enterprise like the leventies, UAC, Banks, Telecommunication industries and others use it to power their ‘lift’. With power failure, their business will be at standstill since people will not be able to move in and out of their companies.

Nigeria has an abundant supply of energy sources. It is endowed with thermal, hydro, solar, and oil resources, and yet it is described as an energy- poor country because the sector is relatively under- developed. Statistics available has shown that only about one third of Nigerian or approximately 40 per cent of the population has access to electricity. The distribution of electricity shows great disparities between rural and urban, and between residential and industrial areas in the urban centres (Ali-Akpajiak&Pyke, 2003).

According to the Worldwide as cited in Diog and Wackwick (2004) air pollution from the burning of solid fuels kills over 1.6million people a year.  More efficient power supply would reduce this death rate. This and many more problems resulting from power supply led the researcher interest in this concept under discussion.

1.3 Research Questions

In the course of the study, the researcher, aim at addressing the research question below;

  • To what extent has energy supply failure impacted on the economic growth of Nigeria in the period under review?
  • Is there any observed long-run relationship between energy supply and economic growth of Nigeria?


1.4 Objective of the Study

The main objective of this study is to examine the impact of power supply failure on Nigeria economic growth. Specifically the objectives of the study are, to:

  1. Examine the impact of power supply failure on Nigeria economic growth in the period under review.
  2. Examine the long-run relationship between power supply failure and Nigeria economic growth in the period under review.

1.5 Research Hypothesis

The hypothesis to guide this work is stated below:

  1. H0: There is no significant impact of energy supply failure on the economic growth of Nigeria.

H1:  There is significant impact of energy supply failure on the economic growth of Nigeria.

  1. H0: There is no long-run relationship between energy supply and economic growth in Nigeria.

H1: There is long-run relationship between energy supply and economic growth in Nigeria.

1.6 Significance of Study

The impact of power failure on the sustainable growth of any nation cannot be over-emphasized; since power play a very substantial role in every sector of any country. This work will be of great importance to the general public, government and its agencies and all policy makers.

Also, it will be of great importance to the ministry of petroleum and energy, and labour. Above all, it will be a foundation for economist, students and researchers who have interest in the energy sector.

 1.7 Scope and Limitation of Study

This research investigate the impact of power supply failure in Nigeria economy, taking a good analysis on various ways and means put by the government of Nigeria to enhance power supply and reduce power outage in Nigeria since 1981-2016.

The researcher encountered a number of constraints in the course of this work to include; data sourcing or data inconsistence due to poor nature of information management in Nigeria. Time factor; which is due to the fact that the time for the research and writing of this project clashed or conflicted with the researcher’s normal classroom activities like lectures, e.t.c. Financial constraints and host of other constraints that prevent the researcher to present a better work than this. Although, effort was made to enhance the quality and beauty of this work despite these few challenges.

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