COVID-19: Dynamics of Socio-Economic Shocks on Energy Sector Performance in Africa
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Date
2022
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Emerald Publishing Limited, Howard House, Wagon Lane, Bingley BD16 1WA, UK
Abstract
The resistance of the energy sector in recent time has been tried by COVID-19 as the occurrence has added to the dampening down demand for crude oil which has resulted in volatility in prices and dwindling production of crude oil at the global crude oil market. Dwindling demand and price decline can also be perceived as a trend in the electricity sector, the electricity price and consumption. The consequences of individual policy response by countries in relation to the socioeconomic impact of COVID-19 is yet to be known and recent studies conducted in the continent are yet to document the impact of the pandemic on the oil-producing African countries. It is in the light of this that this study determined the effect of socio-economic shocks activated through the COVID-19 pandemic on the energy sector performance and economic development of Africa. Monthly data were sourced from the United States Energy Information Administration, COVID-19 geographic distribution worldwide, World Development Indicator and Trading Economics from 2019 (m12) to 2020 (m10). Seventeen oil-producing African countries were selected across the region based on data availability. The structural panel vector auto regression (SPVAR) analytical technique was used in estimating COVID-19 pandemic and socioeconomic shocks on the energy sector performance proxied by oil production (OILP), Electricity price (ELECTP) and Economic Development proxied by Gross Domestic Product per capita (GDPPC) of the countries. Findings revealed that the COVID-19 pandemic transmits a negative shock to oil production and GDP per capita while a positive shock is transmitted to electricity price. The socioeconomic variables also transmitted both the positive and negative shocks to OILP, ELECTP and GDPPC. Therefore, the study recommended that policies should be directed towards putting in place a shock-absorbing mechanism so as to cushion the effect of the identified shocks on the performance of the energy sector and the economic development of the countries.
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Keywords
COVID-19, Energy sector, Socio-Economic, Structural PVAR, Shock, Performance