CHAPTER ONE

INTRODUCTION
1.0 Background of the Study
Electricity generation, transmission and distribution account for less than one per
cent of Nigerias Gross Domestic Products [GDP], but fifty-four per cent of the share
of Utilities (electricity and water supply) in the GDP. They constitute a small
economic activity in Nigeria in relation to her size and population.
However, it is a growth industry which, permitted to operate with minimal
Government intervention, could be a major contributor to the national economy. The
electric power sub-sector in Nigeria is dominated by the Power Holding Company of
Nigeria [PHCN], a Government parastatal.
PHCN supplies most of the electricity consumed in Nigeria, supplemented with power
generated from privately-owned plants. In Nigeria, there is widespread private
provision of electricity usually referred to as captive power supply. In most cases,
captive electric power supply has been a response to irregular public power
generation and transmission.
Before the advent of hydro-generated electricity from the Kainji Power Station,
electricity supply in country was largely by the thermal system. However, the hydro
system ushered in by Kainji in the early 1970s started giving way to the thermal
dominated system again some years later. This was due to the perennial water-flow
problem of the River Niger at Kainji, escalating costs of establishing hydro-plants and
their long gestation lags.
Electricity generation in Nigeria is characterized by excess capacity and inadequate
supply. It has been observed that peak demand is often about one-third of installed
capacity because of the non-availability of spare parts and poor maintenance.
A poorly-motivated workforce, vandalisation and theft of cables and other vital
equipment, accidental destruction of distribution lines, illegal connections and
resultant over-loading of distribution lines, are additional major problems of the
PHCN. These have been responsible for unannounced load shedding, prolonged and
intermittent outages which most consumers of electricity in Nigeria have had to
contend with over the years. The situation will change with the deregulation of the
sub-sector.
Nigerianstat.gov.ng/sectorstat/sectors/electricity

1.1 Objectives of the study

1. To fit a model to the power variables.
2. To determine the level of relationship between the variables.

1.2 Scope and Limitation
1.2.1 Scope
1.2.2 Limitation
1.3 Significance of the Study

1.4 LITERATURE REVIEW
Hendricks and Koenker (1992) in a journal on hierarchical spline models for
conditional quartiles and demand for electricity noted that methods for estimating
nonparametric models for conditional quantiles are suggested based on the regression
quantile methods of Koenker and Bassett. Spline parameterizations of the conditional
quantile functions are used. The methods are illustrated by estimating hierarchical
models for household electricity demand using data from the Chicago metropolitan
area. The empirical results show that lower quantiles of demand (base-load) vary
only slightly across residential households. This variability is difficult to explain using
household characteristics. However, upper quantiles of the demand distribution vary
considerably and are systematically related to household characteristics and
appliance ownership. The implications of analyzing mean demand behavior rather
than various quantiles of the distribution of demand were also discussed

Sadownik and Barbosa (1999) in a journal on short-term forecasting of industrial
electricity consumption in Brazil focused on comparing the results obtained after
using two distinct approaches: dynamic non-linear models and econometric models.
The first method, that they proposed, is based on structural statistical models for
multiple time series analysis and forecasting. It involves non-observable components
of locally linear trends for each individual series and a shared multiplicative seasonal
component described by dynamic harmonics. The second method, adopted by the
electricity power utilities in Brazil, consists of extrapolation of the past data and is
based on statistical relations of simple or multiple regression type. To illustrate the
proposed methodology, a numerical application is considered with real data. The data
represents the monthly industrial electricity consumption in Brazil from the three
main power utilities: Eletropaulo, Cemig and Light, situated at the major energy-
consuming states, Sao Paulo, Rio de Janeiro and Minas Gerais, respectively, in the
Brazilian Southeast region. The chosen time period, January 1990 to September 1994,
corresponds to an economically unstable period just before the beginning of the
Brazilian Privatization Program. Implementation of the algorithms considered in this
work was made via the statistical software S-PLUS.

Sailor and Munoz (1997) in an article on sensitivity of electricity and natural gas
consumption to climate in the USA used the multiple-regression analysis of historical
energy and climate data, and has been applied to eight of the most energy-intensive
states, representing 42% of the total annual energy consumption in the United States.
Statistical models were developed using two sets of independent variablesprimitive
variables such as temperature, relative humidity, and wind speed, and derived
variables including cooling degree days, heating degree days, and enthalpy latent
days. The advantages and disadvantages of both modeling approaches are discussed in
this paper, along with sample results for a combined analysis of residential and
commercial consumption in eight states.

Akinlo (2009) in an article on electricity consumption and economic growth in Nigeria
studied the causality relationship between energy consumption and economic growth
for Nigeria during the period 19802006. The results of our estimation show that real
gross domestic product (rGDP) and electricity consumption (ele) are cointegrated and
there is only unidirectional Granger causality running from electricity consumption
(ele) to (rGDP). Then we applied HodrickPrescott (HP) filter to decompose the trend
and the fluctuation components of the rGDP and electricity consumption (ele) series.
The estimation results show that there is co-integration between the trend and the
cyclical components of the two series, which seems to suggest that the Granger
causality is possibly related with the business cycle. He suggested that investing more
and reducing inefficiency in the supply and use of electricity can further stimulate
economic growth in Nigeria. The results should, however, be interpreted with caution
because of the possibility of loss in power associated with the small sample size and
the danger of omitted variable bias that could result from the use of bi-variate
analysis.

Akinbami (2001) in an article on renewable energy resources and technologies in
Nigeria was of the view that the introduction of renewable energy resources into the
nation's energy mix have implications on its energy budget. The national energy
supply system has been projected into the future using MARKAL, a large scale linear
optimization model. However, this model may not be absolutely representative of the
highly non-linear future of renewable energy. Results of the model reveal that under
only a least cost constraint, only large hydro power technology is the prominent
commercial renewable energy technology in the electricity supply mix of the country.
Despite the immense solar energy potentials available, solar electricity generation is
attractive only under severeCO2emissions mitigation of the nation's energy supply
system. Similarly, the penetration of small-scale hydro power technology in the
electricity supply mix is favoured only under CO
2
emissions constraints. Due to
economy of scale, large hydropower technology takes the lion share of all the
commercial renewable energy resources share for electricity generation under any
CO
2
emissions constraint. These analyses reveal that some barriers exist to the
development and penetration of renewable energy resources electricity production in
Nigeria's energy supply system. Barriers and possible strategies to overcome them
were discussed. Intensive efforts and realistic approach towards energy supply system
in the country will have to be adopted in order to adequately exploit renewable
energy resources and technologies for economic growth and development.

Ubogu (1985) in a journal on the demand for electricity in Nigeria performed an
econometrical model of Nigerian electricity demand. Electricity consumers are
partitioned into three classes-namely. Residential, Commercial and Industrial. It
shows that over the last two decades there has been tremendous increase in both the
supply and demand for electric energy. Although supply has increased, it has not been
able to keep pace with demand. Various explanatory variables that determine
changes in demand are analysed for each of the three consuming sectors. The findings
are as follows.
(i) Per capital income, previous level of electricity consumption and urbanization are
the most significant explanatory variables for the Residential sector's electricity
consumption. The short and long-run income elasticities are found to be below unity,
while whose of urbanization are above unity. The average price of electricity, though
rightly signed, was found to be insignificant.
(ii) As regards the commercial sector, the significant explanatory variables were
previous level of electricity consumption, income, average price of electricity and
urbanization. Urbanization was, however, found to be the most sensitive variable in
respect to changes in the sector's electricity demand.
(iii) Previous level of industrial electricity consumption and degree of urbanization
were the main explanatory variables for changes in the Industrial sector's demand for
electricity. Industrial output and income were not found to be significant variables in
explaining changes in the Industrial sector's demand for electricity.
Payne (2010) in an article on a survey of the electricity consumption-growth studied
the various hypotheses associated with the causal relationship between electricity
consumption and economic growth along with a survey of the empirical literature.
The survey focuses on country coverage, variables selected and model specification,
econometric approaches, various methodological issues, and empirical results. The
results for the specific countries surveyed show that 31.15% supported the neutrality
hypothesis; 27.87% the conservation hypothesis; 22.95% the growth hypothesis; and
18.03% the feedback hypothesis.

Mirasgedis et al (2006) in a journal on models for mid-term electricity demand
forecasting incorporating weather influences noted that electricity demand depends
on economic variables and national circumstances as well as on climatic conditions.
Following the analysis of the time series of electricity demand in the past decade,
two statistical models have been developed, one providing daily and the other
monthly demand predictions, to estimate medium term demand up to 12 months
ahead, utilizing primitive (relative humidity) and derived (heating and cooling degree-
days) meteorological parameters. Autoregressive structures were incorporated in both
models, aiming at reducing serial correlation, which appears to bias the estimated
effects of meteorological parameters on electricity demand. Both modeling
approaches show a high predictive value with adjusted R
2
above 96%. Their
advantages and disadvantages are discussed in this paper. The effect of the climatic
conditions on the electricity demand is then further investigated via predictions under
four different scenarios for the weather conditions of the coming year, which include
both normal and recently observed extreme behavior.

Contreras J et al (2003) in a write-up on ARIMA models to predict next-day electricity
prices stated that Price forecasting is becoming increasingly relevant to producers and
consumers in the new competitive electric power markets. Both for spot markets and
long-term contracts, price forecasts are necessary to develop bidding strategies or
negotiation skills in order to maximize benefit. This paper provides a method to
predict next-day electricity prices based on the ARIMA methodology. ARIMA
techniques are used to analyze time series and, in the past, have been mainly used
for load forecasting, due to their accuracy and mathematical soundness. A detailed
explanation of the aforementioned ARIMA models and results from mainland Spain and
Californian markets are presented.



CHAPTER TWO
DATA COLLECTION
2.1 Method of Data Collection
report from In this project, the method of data collection used is
documentation and Nigeria National Petroleum Corporation (NNPC),
Headquarter Lagos (Annex), Ikoyi and the annual report of statistics
department Central Bank of Nigeria (CBN).

2.2 Limitation of Data Collection
The limitation of data collection is that the data are only in Crude oil
production on NNPC and the data collected are on the actual revenue from
crude oil production, number of manual labour used in the production of crude
oil, cost of equipment used for the production of crude oil and the number of
hours worked in the production of crude oil from 2000 2011 and all the
variables are in aggregate..

2.3 Data Collected


CHAPTER THREE
DATA ANALYSIS

CHAPTER FOUR
SUMMARY, CONCLUSION AND RECOMMENDATION