Independence Of Domestic Gas Consumption On Nigerian Economy
Nigeria has the largest gas reserve in Africa, and its gas reserve outstrips that of oil, yet it produces more of oil and flare the associated gas despite zero level of gas consumption in residential, commercial and transport sector in the country. With the low access to cleaner energies in the country, natural gas has the potential to dominate the energy mix in the country as forecast in IEA Africa energy outlook. Therefore, deliberate policies and investments need to be in place to enhance efficient utilization of gas within the country. Subsequently, this research studied the causality between domestic gas utilization and real economic growth in the country. This will help for optimal policy and investment priorities toward using gas to enhance economic growth in the country. A granger causality test was applied using F-statistics to analyse this dynamic relationship. It was found that domestic gas consumption nor economic growth causes each other in the country, and we concluded that economic growth cannot predict gas consumption, and to achieve the desired domination of gas in the country’s energy mix, direct policy and investment intervention must be made in to the gas sector to precipitate economic growth in the future. Therefore, gas consumption is independent of economic growth in the country, which means economic development alone cannot cause gas consumption in the country, as the economy is largely dependent on oil production and consumption. Therefore, gas consumption cannot predict movement of the Nigerian economy at the current trend and vice versa. However, we found that real GDP, oil production and real oil price can jointly predict domestic gas consumption in the country. If more investment and further infrastructures are provided in the gas sector in the country, the gas sector can then start to feed in more in the economic productivity, and thereby making the economy dependent on the gas sector eventually due to continues increase in gas consumption, and then the significant link between gas consumption and real economic growth might be created. Flaring gas should be stopped so as to channel the produced gas for improved power supply and provide inputs to industries and manufacturing sector, and then the causality could be eventually created.
Index Terms- Domestic Gas Consumption, Real GDP, Nigeria, Granger-Causality And Vector Auto-Regression Model (VAR).