Impact of Shifting to Renewable Energy on the Performance of Manufacturing Companies: A Panacea to the Removal of Oil Subsidy

Abstract

The research analyses the impact of shifting to renewable energy on the performance of manufacturing companies following the removal of the fuel subsidy. The study adopted quantitative research methods utilising unit root tests, heteroscedasticity tests, logistic regression analysis and Chow tests to investigate renewable energy adoption effects on manufacturing performance. Data from Trading Economics, the World Bank, and commodity websites reveal an insignificant relationship between fuel subsidy removal and GDP (p = 0.1362); however, the structural break in 2015 demonstrates significant changes as shown by the Chow test (p = 0.0001). Importation shows a significant relationship to GDP (R² of 65%, p-value of 0.0001). The study using logistic regression (Nagelkerke R² = 52%, p = 0.003) shows that switching to renewable energy sources makes factories more productive. This supports both the resource-based view (RBV) and the energy transition theory. The study recommends two policy directions to support its findings, which include cutting down local product imports, as the significant relationship between GDP and importation is likely to be from high taxes received from imported goods, and funding renewable energy projects, including solar farm development, as well as providing energy subsidy programmes. Governments should implement incentive programmes and infrastructure upgrades to support Nigeria's energy transition because this will enhance economic stability throughout the country.