Urban Household Energy Demand in Southwest Nigeria

Abstract In response to changing prices, incomes and demographics, household use of various fuels such as electricity, gas, kerosene and fuel wood have changed over the years. In this paper we estimate income and price elasticities of household demand for various types of energy in urban southwest Nigeria. Household micro‐data was collected via the administration of a questionnaire. Empirical analysis showed that all energy goods are inelastic for own price elasticities and cross price elasticities. Most of the cross price effects are negative values indicating complementarity between energy goods. This suggests that substitution possibilities between energy goods are quite limited. However, kerosene is shown to be the main fuel used for cooking by about 90 per cent of households; the use of LPG and electricity is minimal. The income group analysis further shows that kerosene is preferred across all income groups. Budget share allocations reveal that households allocate a greater share of their income (40 per cent) to kerosene consumption while LPG gets the lowest share allocation of (3 per cent).