Empirical Analysis of the Determinants of Natural Gas Demand in Nigerian Industries: 2015-2023

Understanding the drivers of industrial natural gas demand is essential for pipeline capacity planning, investment justification, and policy design in Nigeria's evolving gas sector. This study empirically analyses the determinants of natural gas demand across Nigerian industries for the period 2015 to 2023, drawing on a panel dataset of gas consumption records from 90 industrial consumers across Ogun, Kano, Rivers, Abuja, and Enugu. The study employs an autoregressive distributed lag (ARDL) bounds testing approach to estimate both short-run and long-run demand determinants, addressing the non-stationarity properties of energy demand time series data. Explanatory variables modelled include gas price, electricity price, industrial value added, capital stock proxies, and seasonal temperature indices. The study fills a gap in Nigerian gas economics literature by separately analysing demand determinants for large-scale consumers (greater than 1 MMscfd) and small-to-medium consumers (less than 0.5 MMscfd), hypothesising different price sensitivity and income elasticity between the groups. Findings confirm that industrial gas demand in Nigeria is price inelastic in the long run (price elasticity of minus 0.31), suggesting that demand growth is primarily income-driven rather than price-responsive. Electricity price is found to be a statistically significant positive determinant of gas demand, consistent with fuel substitution behaviour. The small-to-medium consumer segment exhibits significantly higher price elasticity (minus 0.58) than large consumers, with implications for tariff policy design. Recommendations include differentiated tariff structures, long-term supply contracts to stabilise price expectations, and investment in gas demand management programmes for large industrial consumers. Keywords: gas demand, industrial consumers, ARDL, Nigeria, demand determinants.