Application of smooth transition regression (STR) model on the relationship between natural gas consumption and economic growth in Nigeria

Abstract

Purpose

The purpose of this paper is to identify the level of natural gas consumption that can be adjudged as capable of improving the growth of the Nigerian economy, to investigate whether natural gas consumption is at optimal level in Nigeria and to examine the nature and rate to which natural gas consumption affects economic growth in Nigeria at low and high regimes.

Design/methodology/approach

The tool used to achieve the objectives of the paper is the smooth transition regression (STR) model.

Findings

The findings of the paper are that the relationship between natural gas consumption and economic growth in Nigeria is asymmetric, where the natural gas consumption threshold value in the country is 9085.36 standard cubic meters, whereas the level of its consumption in the country is below the optimal level. Further, in both low and high regimes, natural gas consumption has been found to have a positive and significant impact on economic growth in Nigeria.

Practical implications

The policy implication of the paper is that natural gas consumption in Nigeria should not be less than 9085.36 standard cubic meters and the country should intensify efforts to increase the level of natural gas consumption, as it is below the optimal level and its consumption bolsters the growth of Nigerian economy.

Originality/value

What is new in this paper is its ability to use the STR model. To the best of the authors’ knowledge, such methodology has not been adopted before in such a relation.

Citation

Galadima, M.D. and Aminu, A.W. (2018), "Application of smooth transition regression (STR) model on the relationship between natural gas consumption and economic growth in Nigeria", International Journal of Energy Sector Management, Vol. 12 No. 2, pp. 284-296. https://doi.org/10.1108/IJESM-12-2017-0009