Energy Equity and the Growth of Manufacturing Sector in Nigeria

Abstract

This paper investigated the impact of energy equity on the growth of the manufacturing sector in Nigeria, with a focus on fossil fuel subsidies as a measure of energy affordability, access to electricity as a measure of energy accessibility, and renewable energy consumption as a measure of clean energy usage over the period 1986 to 2024. The study adopted an ex-post facto research design and utilised annual time series data. The Dynamic Ordinary Least Squares estimation technique was employed after confirming the presence of stationarity in all variables and a long-run cointegrating relationship among them using the Augmented Dickey-Fuller and Engle-Granger cointegration tests. Findings from the analysis revealed that fossil fuel subsidies positively and significantly affected manufacturing sector growth at the 5% level of significance (coefficient = 3.9695; p = 0.0459), suggesting that energy affordability through subsidisation enhanced production by reducing energy costs for manufacturers. Renewable energy consumption also demonstrated a positive and statistically significant relationship with manufacturing sector growth at the 5% level of significance (coefficient = 0.4530; p = 0.0413), highlighting the growing role of sustainable energy sources in supporting industrial activities, particularly in response to grid unreliability. In contrast, access to electricity was found to have a negative but statistically insignificant effect on manufacturing sector growth (coefficient = −0.2555; p = 0.7258), implying that while electricity access had improved over time, issues related to reliability, supply quality, and infrastructure inefficiencies limited its contribution to manufacturing output. Based on these findings, the study recommended that the Federal Ministry of Finance and related fiscal institutions restructure fossil fuel subsidies to directly support manufacturing operations, ensuring cost efficiency without distorting energy markets. The Nigerian Electricity Regulatory Commission, Transmission Company of Nigeria, and Rural Electrification Agency were advised to focus on improving the reliability and consistency of electricity supply to industrial zones. Furthermore, the Federal Ministry of Power and Energy Commission of Nigeria were encouraged to expand investment incentives and regulatory support for the adoption of renewable energy within the manufacturing sector. These recommendations aimed to create a more equitable and efficient energy environment that supports the sustained growth of Nigeria’s manufacturing industry and overall economic development.