Impact of Renewable Energy Production on Government Revenue in Nigeria: 1986-2022

Abstract

This study investigated the impact of renewable energy production on government revenue in Nigeria, addressing the problem of economic diversification and sustainability in the face of declining fossil fuel reliability. The main objective was to assess how different forms of renewable energy—specifically hydroelectric power (HPP), biomass production (BIP), and solar energy production (SEP)—contribute to government fiscal resources. Employing an Auto Regressive Distributive Lag (ARDL) model on data spanning between 1986-2022, the research focused on quantifying the relationships between the production of these renewable energies and their impact on government revenues. The analysis was supported by unit root tests to confirm data stationarity and cointegration tests to ascertain long-run relationships. Findings revealed that all three renewable energy types had significant and positive impacts on government revenue. Hydroelectric power showed a substantial positive association, suggesting that investments in hydroelectric infrastructure could enhance economic activities and tax revenues. Similarly, biomass production was linked to increased fiscal capacity through its integration with agricultural development and sustainable practices. Solar energy, though smaller in scale, significantly contributed to reducing energy import costs and promoting economic independence. Based on these findings, specific recommendations were made. It was suggested that enhancing hydroelectric power infrastructure, promoting biomass projects through fiscal incentives, and supporting solar energy investments by reducing capital costs could further leverage the positive fiscal impacts observed. These strategies are crucial for Nigeria's pursuit of energy sustainability and economic diversification.