The Asymmetric Nexus: Energy Efficiency and Total Factor Productivity in Nigeria’s Manufacturing Sector

Abstract

This study examines the dynamic, non-linear relationship between energy efficiency and total factor productivity (TFP) in Nigeria's manufacturing sector from 1981 to 2023. Using a novel combination of Stochastic Frontier Analysis (SFA) and a Nonlinear Autoregressive Distributed Lag (NARDL) model, we uncover an asymmetric nexus in which improvements and deteriorations in energy efficiency have differential impacts on sectoral performance. Our findings reveal an average energy efficiency score of 82.2%, indicating significant potential for improvement. Crucially, we demonstrate that while efficiency gains positively influence TFP, efficiency losses exert a disproportionately larger negative effect—approximately 2.4 times greater in magnitude. These results challenge conventional symmetric assumptions in production theory and carry substantial implications for industrial policy in energy-dependent developing economies. We argue that energy efficiency should be reconceptualized as a strategic determinant of industrial competitiveness rather than merely a cost-containment measure.