Electricity Supply and Capital Expenditure in Nigeria: Economic Growth Trajectory
Abstract
ABSTRACT This study examines the long-run and short-run dynamic relationships between electricity supply, capital infrastructure expenditure, and economic growth trajectory in Nigeria over a 36-year period (1990–2025). Grounded in Endogenous Growth Theory and the Big Push framework, the paper formulates an empirical framework using time-series data compiled from the World Bank Development Indicators, Central Bank of Nigeria, Federal Ministry of Power, and the Nigerian Electricity Regulatory Commission. The methodology applies the Autoregressive Distributed Lag (ARDL) Bounds Testing approach to cointegration alongside an Unrestricted Error Correction Model (UECM) to evaluate level multipliers and short-run error correction dynamics. The empirical findings confirm a statistically significant long-run cointegrating relationship among real Gross Domestic Product (GDP), installed electricity generation capacity, transmission and distribution losses, electricity access, and public infrastructure capital expenditure (F-statistic = 6.85, exceeding the 1% upper bound threshold). Installed electricity capacity and grid access exhibit strong positive associations with long-term real GDP output, confirming that power expansion serves as a major driver of national economic performance. However, transmission and distribution losses exceeding 50% of generated output severely curtail short-run growth potential. Furthermore, capital infrastructure expenditure displays lagged productive gains, reflecting severe implementation delays and liquidity bottlenecks within the Nigerian power sector. The Error Correction Term (ECT_{t-1} = -0.2275) indicates a moderate adjustment speed, correcting approximately 22.75% of short-run disequilibrium shocks back to the long-run equilibrium path annually. The paper concludes that expanding generation capacity alone cannot unlock Nigeria's economic growth trajectory unless structural grid inefficiencies and fiscal constraints are decisively addressed. Key policy recommendations call for a focused 'two-agenda' strategy prioritizing power supply and capital infrastructure, aggressive investment in grid transmission modernization under the Presidential Power Initiative, resolving sector liquidity and unmetered customer gaps, and accelerating decentralized off-grid renewable solutions to alleviate enterprise operational overhead. Keywords: Electricity Supply, Capital Expenditure, Economic Growth Trajectory, ARDL Model, Transmission Losses, Nigeria.