Energy consumption of manufacturing sector: a search for sustainable energy source in Nigeria

Abstract

Manufacturing companies in a bid to realize high-quality development, figure out how to make the most use of their materials and improve their operating processes in a sustainable way. With an emphasis on sustainable energy practices that lessen reliance on fossil fuels and cut CO2 emissions, this study examines the relationship between energy consumption, manufacturing output, and economic growth in Nigeria. The study examines the effects of natural gas, renewable biofuels, fuel oil, gas/diesel, gasoline, and electricity on manufacturing production using time series data covering 1990 to 2019. It employed an autoregressive distributed lag (ARDL) model estimate technique. The short-run dynamics and long-run relationships are examined in the ARDL model. In the short-run motor gasoline, natural gas renewable biofuel, gas/diesel and fuel oil are economically and statistically significant both in the current year and up to the second lagged period. While the ARDL bound test reveals that there is cointegration among the variable in the long run. Renewable biofuels and fuel oil are the only variables that have a direct and statistically significant positive relationship with GDP manufacturing output. Therefore, increasing the use of these energy sources is likely to increase the output of GDP manufacturing in the long run. According to the Granger Causality Test, there is a bidirectional relationship between manufacturing output and both gasoline and renewable biofuel. In contrast, there is a Granger causality relationship between manufacturing output and gas/diesel and electricity. Furthermore, the test indicates that manufacturing GDP only has a Granger cause renewable biofuel. The findings show the individual effects of the renewable biofuel energy source and thus its importance viz-a-viz reduction of CO2 emissions, sustainability, sufficiency in capacity (in Nigeria context) can increased Gross Domestic Product (GDP) manufacturing output. It is therefore recommended that policymakers ensure a switch and make available renewable biofuel sources.