Does access to credit promote the use of modern energy services? Evidence from rural Nigeria

Abstract

This study examines the impact of access to credit on the adoption of modern energy services among rural households in Nigeria. Using a panel dataset of 3380 households drawn from the General Household Survey (GHS), we apply Coarsened Exact Matching (CEM) to mitigate potential selection bias and Difference-in-Differences (DiD) estimation to address endogeneity concerns. The results reveal that access to credit has a modest yet statistically significant effect on the adoption of modern energy services. Further analysis indicates that this impact is concentrated in the uptake of three basic services: electric lighting, phone charging, and fan ventilation, suggesting that credit is primarily used to finance energy needs considered essential for daily living. Moreover, the source of credit emerges as an important factor, with formal and informal lenders influencing adoption outcomes differently. Beyond financial access, our findings underscore the importance of broader socioeconomic and infrastructural factors. Household wealth is a key determinant of energy service adoption, while the education level of the household head and the type of energy connection (on-grid vs. off-grid) also significantly shape adoption patterns. These insights highlight the multifaceted nature of energy access and suggest that credit interventions alone may be insufficient to drive comprehensive energy transitions in rural contexts.