Nigerian Economic Society, NES

EFFECT OF ECONOMIC DIVERSIFICATION ON ENERGY AND CARBON EFFICIENCY IN OIL-RICH ECONOMIES: Empirical Evidence from Nigeria

Category: Journal Articles
Author: Adeolu O. Adewuyi and Adebowale M. Adeleke
Volume: 59 Issue No:2 Year:2017

Abstract: This study investigated the impact of economic diversification on energy and carbon efficiency in Nigeria from 1981-2014. The study applied a two-stage approach to analyse the models articulated based on the standard theoretical and empirical literature on energy efficiency. Efficiency analysis indicates that the combination of inputs yielded a relatively higher output (good efficiency) during the 1998-2014 period compared to the earlier period of 1981-1997. However, an inputs mix generated a lower level of carbon emission (bad efficiency) in the periods, 1989-1991, 1995-1999 and 2009-2014. There was environmental inefficiency in the 1980s. However, apart from 1992/93, environmental efficiency was achieved in the 1990s. Similarly, besides 2000-2003, environmental efficiency was attained between 2004 and 2014. Positive net efficiency was higher during 1995-1999 and 2009-2014 compared to other periods. Output concentration (diversification) index rose from 0.32 in 1981 to between 0.4 and 0.5 in the subsequent years. Regression results confirmed that movement towards output concentration (and away from output diversification) will improve good efficiency. However, increase in GDP per capita and skill will promote bad efficiency; while increased output diversification and GDP per capita will also improve bad efficiency. In the same vein, results showed that increase in both GDP per capita and skill will lead to a reduction in environmental efficiency, while increase in GDP per capita and output diversification will improve environmental efficiency. The results show that movement towards output concentration will improve net environmental efficiency. It is concluded that economic (output) diversification is harmful for good, environmental and net efficiency, why it only helps abate the bad efficiency (increased carbon) in Nigeria. Some recommendations are made for future policy making.

JEL classification: L25; H21; O13; O47

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