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Full Project – THE IMPACT OF POWER GENERATION ON ECONOMIC PERFORMANCE OF NIGERIA (1970-2015)

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CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

The advanced and developed economies of the world today would not have been what they are today without relying on effective power generation for their rapid growth recorded. According to Mulegeta et al (2010), power generation is an indispensable component in economic performance, directly or indirectly as a complement to capital and labor as an input in the production process. However, this study is examining the impact of power generation on economic performance of Nigeria between 1970 and 2015.

Studies have shown that the relationship between power generation and economic growth remains indeterminate in terms of the direction of the causal relationship and their long run as well as short run relationships (CIA, 2011).

In Nigeria, power generation is one of the major sources of energy driving production and facilitating services. It is a flexible source of energy and a highly demanded resource for modern life. It is a vital infrastructural component of economic performance. In all economies, households and companies have extensive demand for electricity derived from power generation (EIA, 2011). This demand is driven by several important factors such as industrialization, extensive urbanization, population growth, rising standard of living. One of the key policy objectives of any nation is to promote a sustainable economic performance process that could improve the living standard of the people. Adequate power generation is one of the major infrastructural developments that can increase the standard of living of the people (EIA, 2011). Several policies have come and gone as an attempted act for policy makers to decide on what approach to pursue- whether to attend to economic performance issues, which would in turn lead to increased power generation or to emphasize on power generation in order to attain higher income levels. But with the inclusion of the classical production propellers i.e. capital and labor stock, the augmentable capacity of power generation and economic performance can be determined.

Poor access to electricity occasioned by inadequate power generation in Nigeria has been a major impediment to Nigeria’s economic performance. Businesses (both large and small) have been adjudged as the engine of economic growth but its performance is grossly dismal due to inadequate power supply. Researchers have identified the increase in power generation as a vital component of emerging economies; economic growth of the South Asia Association for Regional Cooperation (SAARC) countries – involving Bangladesh, India, Pakistan and Sri Lanka is closely related to its power generation which is an impediment for enhancing export values, increasing remittances receipts from manpower supply (Sheriff, 2002). Whether African economies, most especially Nigeria are ready for developmental take-off should be based on its readiness to ensure adequate and regular power supply through adequate and effective power generation system, which represent a crucial factor that supports economic performance in developing countries.

With the collapse of the World Bank and International Monetary Fund policy’s on Structural Adjustment Programme (SAP) in Africa, many questions have been raised by scholars on the factors impeding economic development in leading African nations including Nigeria (Jega, 2003). They argued that economic liberalization in other parts of the world have continued to yield anticipated results, increasing global trade and technological advancements such that by the end of the 21st century some emergent economies have appeared on the global capitalist markets. It is no gainsaying the fact that the likes of Indonesia, China, Japan and Malaysia are now making new waves in the global markets. While this thinking continues about global capitalist development, researches conducted by the United Nations and the World Bank has shown that Nigeria’s economic performance is routinely constrained by some inherent cultural factors (NISER, 2000). Although Nigeria is rich in human and material resources, its economic and political developments have been fraught with crises since independence in 1960. Indices of the failure of the Nigerian state are today evident in the pervasive cases of hunger, inflation, budget deficits, debt overhang, street begging, prostitution, frauds, high crime rates in major cities, collapse of manufacturing industries, corruption in public service, stagnation in entrepreneurial development and epileptic power supply (Fadeyi and Adisa, 2012). In the face of these crises it becomes difficult for sustainable economic development to take place in the country (NISER, 2000 and UNDP, 2006).

1.2 STATEMENT OF THE PROBLEM

Power generation plays an important role in economic development of Nigeria. It is, therefore important to identify the relationship between power generation and national output and also the direction of causality in order to get a better understanding of the vital related issues and also determine if the results are ideal for policy formulation. The impact of power generation on economic development in Nigeria has however being studied in several existing literatures, but in relationship with variables ranging from foreign direct investment to energy use and so on. This study is to however analyze the influence of other variable on the initial relationship i.e. power generation and economic performance. The interest of the researcher is also to examine the huge expenditure injected annually into the power generation and its attendant impact on the Nigerian economy.

1.3 OBJECTIVES OF THE STUDY

The following are the objectives of this study:

To examine the impact of power generation on economic performance of Nigeria between 1970 and 2015.
To examine the impact of capital investment in power on economic performance of Nigeria between 1970 and 2015.
To examine the contribution of the total manpower (labour) in the power sector to economic performance of Nigeria between 1970 and 2015.

1.4 RESEARCH QUESTIONS

What is the impact of power generation on economic performance of Nigeria between 1970 and 2015?
What is the impact of capital investment in power on economic performance of Nigeria between 1970 and 2015?
What are the contributions of the total manpower (labour) in the power sector to economic performance of Nigeria between 1970 and 2015?

1.5 HYPOTHESIS

Hypothesis One

HO1: There is no significant relationship between power generation and economic performance of Nigeria between 1970 and 2015

HA1: There is significant relationship between power generation and economic performance of Nigeria between 1970 and 2015

Hypothesis two

HO2: There is no significant relationship between capital investment in power and economic performance of Nigeria between 1970 and 2015

HA2: There is significant relationship between capital investment in power and economic performance of Nigeria between 1970 and 2015

Hypothesis three

HO3: There is no significant relationship between total manpower (labour) in the power sector and economic performance of Nigeria between 1970 and 2015

HA3: There is significant relationship between total manpower (labour) in the power sector and economic performance of Nigeria between 1970 and 2015

1.6 SIGNIFICANCE OF THE STUDY

The following are the significance of this study:

The results from this study will educate the government of Nigeria, policy makers and the general public on the impact of power generation on economic performance between 1970 and 2015. It will also reveal the effect of the huge capital investment in power generation on the economic performance of Nigeria.
This research will be a contribution to the body of literature in the area of the impact of power generation on economic performance of Nigeria, thereby constituting the empirical literature for future research in the subject area.

1.7 SCOPE/LIMITATIONS OF THE STUDY

This study is limited to the power generation in Nigeria between 1970 and 2015. It will also cover the effect of power generation on Nigeria GDP within the period under study.

LIMITATION OF STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

REFERENCES

Mulugeta, S.K, Nondo, C., Schaeffer, P.V., and Gebremedhin, T.G. (2010). “Does level of income matter in the energy Consumption and GDP Nexus: Evidence from Sub-saharan African Countries.” Research Paper#7, Research Institute, West Virginia University.

CIA, (2011), Central Intelligence Agency World Fact Book. Retrieve from www.cia.gov/library/publications/the-worldfactbook/geos/bc.html on May 25, 2011

EIA, (2011), US Energy Information Administration Dataset. Retrieve from http://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?tid=2&pid=2&aid=2&cid=BC,&syid=1980&eyid=2009&unit=BKWH on May 25, 2011

Fadeyi, A.O. and W. B. Adisa (2012), “Cultural Impediments to Socio-Economic Development in Nigeria: Lessons from the Chinese Economy” Journal of Sustainable Development; Vol. 5(7). Published by Canadian Center of Science and Education.

FG (2013), Nigeria Power Crises: Reversing Decades of Gevernment Monopoly and Stagnation. www.nigeriapowerreform.org

Jega, A. (2003). Identity Transformation and Identity Politics under Structural Adjustment in Nigeria. Kano: Nordiska Afrikainstitutet.

NISER, (2000). Review of Nigerian Development: The State in Nigerian Development, Ibadan, NISER.

UNDP (2006). Human Development Report, New York: UNDP

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