Energy Use and Mining Sector Performance in Nigeria

This study examines the contribution of energy use to mining sector growth in Nigeria. The specific objectives are the effects of fossil fuel use, renewable energy use, alternative energy use, and total electricity use on mining sector value added to the gross domestic product (GDP). The time series data for each of the variables were obtained from secondary sources, including the World Bank, International Energy Agency (IEA) and Organisation of Economic Cooperation and Development (OECD) National Data Accounts. This study utilised least squares method to estimate the ARDL model. Evidence of a positive and significant effect of fossil fuel energy use on the mining sector value added in the long run. The estimated parameter showed that the mining sector value added increased by 1.607% following a percentage increase in the fossil fuel energy use. This finding suggests that the mining sector tends to rely on fossil fuels to increase output. The results further showed that the renewable energy use and alternative do not significantly affect mining sector value added in both the short and long run. This finding is not surprising as it highlights the poor transition to renewable and alternative energy sources, which undermines their significant contribution to the mining sector's growth. In addition, the results showed that total electricity use has a positive and significant effect on the mining sector value added. As observed from the corresponding coefficient, a 1% increase in total electricity use leads to a 1.68% increase in the mining sector value added. This finding indicates that access to electricity plays a significant role in promoting the growth of the mining sector. The error correction coefficient (-0.2275) shows that distortion from the long run equilibrium position can be corrected at the speed of 22.75% each year. The R-squared (0.9414) showed that 94.14% of the total variations in the mining sector value added are jointly explained by changes in fossil fuel, renewable energy, alternative energy and electricity use. Given the findings, we recommend that policymakers should reduce fossil fuel dependency as a source of energy by diversifying energy sources to create more opportunities for firms in the mining sector to boost their output and value addition to GDP.