Electricity consumption and industrial output: fresh evidence from economic community of West African states (ECOWAS)

Abstract

PurposeThe current wave of decreasing electricity supply to meet the immediate demand of the populace is influencing not only economic growth but also the industrial productivity of the ECOWAS sub-region. In this context, this paper investigates the long-run and causal relationships between electricity consumption and industrial output in selected ECOWAS countries over the period 1971–2017.Design/methodology/approachThe Autoregressive Distributed Lag (ARDL) bound testing approach is employed to determine the existence of relationships among the variables. The causal nexus between electricity consumption and industrial output is examined using both the Toda-Yamamoto causality test and the bootstrap-corrected causality technique.FindingsThe long run results indicated that increasing electricity supply enhances industrial output only in Benin, Cote d'Ivoire, Gambia, Guinea, Liberia, Nigeria, Senegal, and Sierra Leone. Furthermore, the causality test results confirmed the presence of all four hypotheses in this study, but the two causality tests agree, particularly in the evidence of growth and neutrality hypotheses. In the cases of Benin, Burkina Faso, Gambia, Ghana, Nigeria, and Sierra Leone, a unilateral causality running from electricity consumption to industrial output is found. However, no evidence of causality between electricity consumption and industrial production has been confirmed in Cote d'Ivoire, Guinea Bissau, Liberia and Niger.Practical implicationsThe relevant energy stakeholders in the subregion need to reprioritize their policy framework to focus more on the electricity sector of their economies since electricity consumption is identified as an important driver of industrial growth in the West African countries.Originality/valueThis is the first study to provide a comparative and country-specific investigation of the nexus between electricity consumption and industrial output in Africa, particularly in the West African region.