Effect of Energy Transition on Energy Investment in Nigeria.

Abstract

This study investigates the determinants of energy-sector investment in Nigeria from 2010 to 2023 using a quarterly dataset constructed from multiple secondary sources, including FDI inflows, governance indicators, oil-market data, exchange-rate trends, and GDP performance. To address methodological limitations in earlier studies that relied on annual data and OLS regression, this paper employs a Python-based econometric framework, using pandas for data transformation and statsmodels for dynamic modelling. Augmented DickeyFuller tests confirm that the variables are predominantly non-stationary, justifying the use of an Autoregressive Distributed Lag (ARDL) model. The baseline ARDL results reveal that energy investment exhibits strong persistence and is significantly influenced by governance effectiveness, while exchange-rate instability exerts a marginally negative effect. Oil prices, GDP growth, and policy reforms show weak short-run effects. A robustness model, the ARDL, confirms the stability of these findings, although the lagged policy dummy indicates temporary adjustment frictions following major reforms. A 3D Python visualisation further demonstrates that investment clusters around periods of stronger governance rather than high oil prices. Overall, the results indicate that institutional quality and macroeconomic stability, rather than commodity price cycles, are the most critical drivers of energy-sector investment in Nigeria. The study concludes that improving governance, stabilising the exchange rate, and strengthening policy implementation frameworks are essential to sustaining investment and supporting Nigeria's energy transition ambitions.