Read Online

Download PDF (EN)

Abstract

This study examines the link between energy consumption and international trade in Nigeria using annual data from 1980 to 2018. The results which were based on the Autoregressive Distributed Lag (ARDL) methodology show that energy consumption significantly improves trade both in terms of total trade, imports and exports in Nigeria. Specifically, a 1% increase in energy consumption (ENE) leads to 5.16 % in total trade. Similarly, a 1% increase in energy consumption increases imports and exports by 1.02% and 10.35% respectively. Domestic income and exchange rate were found to be important determinants of total trade and imports, though with different implications. While increase in domestic income by 1% raises total trade by 1.61% and imports by 0.60%. The Granger causality showed a bi-directional causality between energy consumption and total trade on the one hand and between energy consumption and imports on the other hand. Since trade can affect economic activity by enhancing trade volume and, consequently, the energy consumption level, policymakers should develop appropriate policies to profit from trade without jeopardizing energy consumption. Again, the increase in trade volume due to the increasing use of energy is likely to have an environmental consequence. Therefore, policymakers must evolve energy conservation control measures to reduce overall energy consumption without imposing dire implications on trade. This is essential because expanding domestic output and international trade can reshape energy demand due to scale effect.