Empirical estimation of the impacts of inflation on the construction sector in Nigeria

Abstract

The construction sector is one of the largest single industries in the world contributing to the economy through its backward and forward linkages as well as aggregate demand.However, despite its importance to the development of the economy, it is severely hampered by instability or inflation. This study investigates the effect of the inflation rate on the construction sector through the econometric methodology to analyze time series data obtained from the year 2020 statistical bulletin (volume 30) of the Central Bank of Nigeria. The result indicates that inflation significantly impacts the construction sector.The study concludes that the construction sector is significantly affected by seasons and the Gross Domestic Product (GDP) whereas the construction sector significantly affects the price level. The study recommends the de-seasonalisation of the construction sector through industrialization. The government must implement fiscal and monetary measures to manage inflation to stabilize the construction sector. Finally, to stem the tide of the high cost of construction, the government should implement a policy to improve local content in the sector to immune construction from the vagaries of the foreign exchange market.