Analysis of Energy Poverty and Economic Welfare Dynamics in Nigeria

Energy poverty in rural areas leads to heavy reliance on traditional fuels, causing health risks, environmental damage, and reduced productivity, especially affecting women and children. Improving electricity access enhances economic welfare, education, and poverty reduction, while lack of energy access perpetuates poverty and limits development, particularly in developing countries like Nigeria. This study examined the impact of energy poverty on economic welfare dynamics in Nigeria using electricity access (EA), electricity consumption (EC), and electricity use (EU) as key energy poverty indicators, while electricity generation (EG) and inflation (IF) were included as control variables. The study was motivated by the persistent energy deprivation in Nigeria despite the country’s abundant energy resources. Annual time-series data spanning 1990-2024 were analyzed using the Nonlinear Autoregressive Distributed Lag (NARDL) model to capture both symmetric and asymmetric effects of energy variables on household welfare. Preliminary tests, including the Augmented Dickey–Fuller unit root test and the Bounds cointegration test, confirmed stationarity and the existence of a long-run relationship among the variables. The long-run results indicate that increases in electricity access significantly improve economic welfare, whereas decreases are insignificant. Electricity consumption shows a significant negative long-run effect on economic welfare for both positive and negative shocks. Similarly, positive changes in electricity use have a significant negative effect on economic welfare, while negative changes remain insignificant. Electricity generation has a positive but statistically insignificant effect on economic welfare. Inflation also shows a negative but insignificant long-run effect. In the short run, positive shocks to electricity access and consumption significantly improve economic welfare, whereas inflation significantly reduces it. The error correction term is negative and statistically significant, indicating long-run convergence of the system. The study concludes that improving electricity access plays a critical role in enhancing household welfare in Nigeria, although inefficiencies in electricity consumption and energy use may reduce welfare gains. The study recommends strengthening electricity infrastructure, promoting efficient energy utilization, and implementing policies that ensure an affordable and reliable energy supply to improve household welfare.