Empirical Study of the Relationship Between Natural Gas Pricing and Industrial Output in Nigeria’s Manufacturing Sector

The relationship between energy input costs and industrial productivity is well established in economic theory, yet the specific dynamics of gas price changes on Nigerian manufacturing output remain empirically underdeveloped. This study investigates the empirical relationship between natural gas pricing and industrial output across Nigeria's manufacturing sector, utilising panel data from 120 manufacturing firms in five states representing three geopolitical zones. The research employs a structural equation modelling (SEM) approach, supplemented by dynamic panel data estimation using the generalised method of moments (GMM) to account for endogeneity in the gas price-output relationship. The dataset covers the period 2016 to 2023, encompassing two significant domestic gas price adjustments. Control variables include electricity price, labour cost, exchange rate, and sector demand indicators. The study distinguishes between energy-intensive industries (ceramics, glass, cement) and moderate-energy industries (food processing, textiles) to test for heterogeneous price sensitivity. Findings confirm a statistically significant negative elasticity of industrial output with respect to gas price, estimated at minus 0.43 on average, with energy-intensive industries exhibiting elasticity values approaching minus 0.7. The study further reveals that gas price pass-through to final goods prices is incomplete in competitive industries, compressing margins and reducing investment. These findings fill an evidence gap in the literature on energy-industrial policy in sub-Saharan Africa. Recommendations include managed gas price adjustment schedules with industry transition support, energy efficiency grant programmes for high-elasticity manufacturing sectors, and an industrial gas price index published quarterly by the NMDPRA. Keywords: gas pricing, industrial output, manufacturing, panel data, Nigeria.