Abstract
The reason of this paper is to examine the inter fuel substitution likelihood and allocative efficiency between the two major fossil fuel inputs (oil and gas) used in the production of electricity in Nigeria. The problem is studied generally within a CES functional form representation, which was later reduced to a C-D functional relation. We estimated a weakly separable production function for oil and gas fuelled electric energy production independent of other factor inputs. The estimation procedure adopted ADRL approach using time series data for the period 1970-2006. The results obtained from the analysis indicate that the elasticity of substitution between the inputs is one, and therefore, producers could easily take advantage of price changes to ensure allocative efficiency in their inputs combination for oil and gas. However, the analysis in respect of allocative efficiency showed that the production process was inefficient in allocation of inputs. The conclusion provides future directions for inter fuel substitution in the thermal electricity production in Nigeria.

W.A. Isola, L.O. Oderinde. (2010) Interfuel Substitution and Allocative Efficiency in Electricity Production in Nigeria, Journal of Business & Economics , Volume-02, Issue-1.
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