Influence of energy consumption on economic growth in Kenya

Abstract

Every sovereign nation’s goal is to raise the standard of living for its citizen’s by promoting economic growth. Economic growth is all about increasing productivity which is determined by many macroeconomic variables where energy consumption is a key variable. Kenya uses energy in most of its sectors in order to enhance production. According to Kenya’s Vision 2030, Kenya aimed to achieve an average GDP of 10% per annum beginning the year 2012. However, achieving this economic growth rate has been unfeasible. Kenya’s economic growth rate has been unimpressive and often fluctuating. The purpose of this study was to analyze influence of energy consumption on economic growth in Kenya. Specific objectives of the study were to analyze influence of electricity, petroleum and gas consumption on economic growth in Kenya. The study period was 2008-2020. Neo Classical growth, Depletion theories and Growth hypothesis were employed. Explanatory research design was employed. Secondary data sourced from the World Bank database. General Method of Moment model was adopted. Over identifying test and normality tests were conducted before making inferences. Both descriptive and inferential statistics were used in data analysis. Results were presented in form of graphs and tables. The results of the study showed that coefficient of petroleum consumption was , , which was positive and significant at 5% level. This implied that for every 1% increase in petroleum consumption led to 7.6514% increase in GDP growth rate. Coefficient of gas consumption was , , which was negative and significant at 5% level. This implied that 1% increase in gas consumption would result in a reduction of GDP growth rate by 2.1673%. Coefficient of electricity consumption had a coefficient of was p=0.907 which was insignificant at 5% level. The study observed that petroleum and gas consumptions influenced economic growth in Kenya. The study therefore recommends that petroleum supply should be increased in the country considering that petroleum consumption influenced positively economic growth rate in Kenya. The government should sustain and enhance petroleum consumption through subsidies and availing in order to increase production leading to increase in economic growth rate. Further the government should consider the supply of gas and the nature of subsidy available so that gas consumption be reversed in order to have positive effect on economic growth rate. Findings of this study could be utilized by government in budget making process in the parliament or ministerial preliminary budgets and in the allocation of funds to various sectors that require substantial energy input. Additionally, findings could assist the government in order to expand current sources and exploit the other sources of energy such as solar energy, wind energy, thermal energy so as to increase the production and consumption of energy which increases economic growth. Policy makers could use these findings to establish energy policies that are realistic, time bound and those that enhance sustainable economic growth in Kenya. Government of Kenya could consider the mode of provision of electricity consumption so as to have a significant effect on economic growth in Kenya. Finally, academicians could use the results in future references and scholarly studies in creating new angle of thinking and doing things.