1.1 Background to the Study
At the dawn of this twenty-first century, strong efforts are being made round the world to accelerate the pace of economic growth and development. Concerns such as poverty eradication, empowerment of women, improvement in education, health and environmental protection for people living in the developing countries have received increased attention in world. The increasing attention paid to growth, development and social capital in the global arena is silently, but steadily overthrowing the economic and social conflicts that are prevalent in most developing countries.
There is a trendy perception that the economic development of any nation relies upon the quantity and quality of its resources. Resources-rich growing nations have the duty and the task to make certain that the benefits accruable from these resources clear flow down to the poor. However, it is obvious that Africa is currently riddled with poverty, disease, ignorance, food insecurity and famine, with a massive external debt and continued mismanagement of human, material and physical resources (Iwuagwu, 2000). It is not unexpected, in this manner that 22 of the 36 poorest nations of the world are in Africa.
In the case of Nigeria, despite its large renewable and non-renewable resources, the country is still grappling with mounting economic problems of unemployment, hunger, poverty, external debt burden and decaying public infrastructures. The development challenges facing Nigeria are not of improving one sector or region at the expense of another or of introducing policy distortions and inefficiencies in resource allocations to the benefit of one group, which in the past led to increased poverty for others, but rather to adopt growth and social service-oriented policies that will enable all Nigeria’s inhabitants to improve their welfare (Nwaobi, 2004). President Obasanjo (2006) admitted that the building blocks for the diversification of the Nigerian economy and the priority sources of growth for the economy are agriculture, manufacturing, solid minerals and construction. In other words, accelerating the pace of growth and development of the agricultural, manufacturing, mining (solid minerals), education, healthcare and other non-oil sectors will lead to faster integration and improvement in the welfare of the vast majority of the population of Nigeria.
The construction sector is the core of the development of any country. From multiple points of view, the speed of the economic growth of any country can be estimated by the improvement of physical infrastructures, for example, buildings, roads and bridges. As indicated by Wang (1994), as construction is turning out to be more mind boggling, a more refined approach is important to deal with, arranging, financing, planning, approving, implementing and completing a project. According to Navon (2005) the construction sector is complex in its nature since it contains large bodies as owners (customers), contractors, consultants, shareholders, stakeholders and regulators. Notwithstanding this complexity, the sector assumes a significant part in the development and achievement of societal goals. It is perhaps the biggest sector and contributes 10% of the Gross National Product (GNP) in industrialized nations. Nigeria is no exemption; the local construction industry is one of the main economic engine sectors, supporting the Nigeria national economy. Be that as it may, numerous local construction projects report poor performance because of numerous evidential project-specific causes, for example, inaccessibility of materials, unreasonable corrections of plan and drawings, helpless coordination among members, ineffectual monitoring and criticism, and absence of project leadership skills (UNRWA, 2006).
The building construction industry in Nigeria is a fast growing sector of the economy which recorded a growth rate of more than 20% between 2006 and 2007. This growth however is not equal when compared to the growth of Nigeria’s total GDP as the overall contribution of the construction sector to the country’s GDP remains very low at 1.83% in 2008. Key factors that have contributed to the growth in the construction and property sector include high demand for buildings across all sectors of the economy; the focus on infrastructure development by state and federal governments; the adoption of privatization and commercialization as instruments of federal government policy and attempts at controlling regulations relating to how the constructions business is carried out in the country (Trade Invest Nigeria, 2012).
In Nigeria specifically, after restructuring and re-basing her National Account at 2010 constant basic price, Nigeria’s economy became the largest in the Sub-Saharan African. Consequently, Nigeria’s GDP increased from 18% in 2009 to around 32% in 2013 and thus outpaced the South African economy which used to be the largest economy, but whose share decreased from 30% in 2009 to 22% in 2013 (EMIS, 2015). Interestingly, National Bureau of Statistics (NBS, 2015) reports that the Nigerian economy has experienced a great change in terms of volume of activities covered in all sectors of the economy as the post-rebasing data in the construction sector shows a much more optimistic picture, as more modern construction activities have been captured, and prices correctly deflated. The boom in the oil area assumed a critical part for the economic advancement in Nigeria before. Tragically, the current drop in oil costs has caused significant issue for the Nigerian economy and introduced a significant danger for the construction sector as it reduced budget revenues and limited the government’s authority's capacities for infrastructure investments. The stun on the Nigerian economy is significantly seen in the general performance of the economy.
Therefore, the continue decline and contraction of the Nigeria economy needs to be investigated in relation to the activities of the construction sector as one of the key sectors of the economy. This period of economic redundancy and retrogression requires workable policies based on accurate information in all sectors of the economy for efficient and sustainable economic growth. This position is validated by Kargi (2013) who found that the development pace of the construction sector in the developing nations is more than the GDP growth rate, and that the rate it takes in the GDP of developed nations moderately decreases. Kargi (2013) reveals that development industry's industry in the economic instability periods, in the aftermath of a recession, is more than the GDP. Thus, Giang and Pheng (2011) postulate that the construction sector is immeasurably influenced by and furthermore influences the economic growth patterns and the changes in these patterns. It should then be noticed that the process of economic growth is firmly related particularly to the adequacy of the public infrastructure investments regardless of whether there are fluctuations (2011).
1.2 Statement of the Problem
The Nigerian economy was at the same level of development as countries such as Brazil, Indonesia, Malaysia and Pakistan in the 1950’s - 60’s, but today it is far behind all of them in terms of its overall level of economic development (Egbochuku, 2001). In essence, Nigeria has lagged behind other oil producing countries in terms of development, especially as most of these countries are now emerging as newly industrialised countries (NICs).
Obadan (2001) summarises the development challenges facing the country today as follows: how to revive the prostate economy, promote efficient and respectable economic growth, and increase productivity; and how to establish and sustain a viable and stable macroeconomic framework in the context of a stable democratic political system. In light of deteriorating social indicators, the government must urgently begin to reduce poverty, create employment opportunities and revive the infrastructural services in the country
Reflecting on the performance of Nigeria’s economy, Abdulahi (2002) concludes that it is still not satisfactory for the average Nigerian citizen. Problems, therefore, exist given that the different development planning, objectives and efforts put in place by the various past governments aimed at poverty reduction and general economic development, have not achieved the desired objectives. The problem is either that the construction policy objectives are not well articulated or that certain actions by the governments and others within the economy have tended to encourage variables that hinder the implementation and realisation of economic development in the country.
Also, current reports on the state of Nigeria economy present a shocking pattern. In the First Quarter of 2016 for example, the country's Gross Domestic Product (GDP) developed by - 0.36% (year-on-year) in genuine terms. The negative development in Q1, 2016 was generally determined by the services, construction, and industrial areas with relative commitments of 0.07, 0.23, and 1.03 rate focuses, separately. This proposes that Nigeria economy is steadily crawling into downturn. Thusly, understanding the elements of construction sector in the economic cycle is instrumental to reaching right strategy determinations for what is to come. The way that construction sector is liable to boom-bust cycle far more stronger than those experienced by different sectors for the most part connected with fluctuating fortunes makes this study worthwhile. Thus, this study investigates the impact of Nigeria unstable economy on construction sector from 2015 to 2020.
1.3 Objectives of the Study
The main objective of this study is to investigate the impact of Nigeria unstable economy on construction sector from 2015 to 2020. The specific objectives are:
i) To inquire about the factors that affect construction sector performance in Nigeria
ii) To understand the reasons for unstable economy in Nigeria
iii) To investigate the effect of construction sector performance on the economic development of Nigeria
iv) To examine the challenges facing the Nigerian construction sector and its effects on the economic development
1.4 Research Questions
The following are some of the questions which this study intends to answer:
i) What are the factors that affect construction sector performance in Nigeria?
ii) What are the reasons for unstable economy in Nigeria?
iii) What are the effects of construction sector performance on the economic development of Nigeria?
iv) What are the challenges facing the Nigerian construction sector and its effects on the economic development?
1.5 Research Hypotheses
The following statements will be considered to be the research hypotheses for this study:
i) There is no significant effect of construction sector performance and the economic development of Nigeria
ii) There is a significant relationship between the Nigerian construction sector and economic instability
1.6 Significance of the Study
This study sought to investigate t the impact of Nigeria unstable economy on construction sector from 2015 to 2020. It will show the reason why there is economic instability in the country and give insight on how economic instability directly affects the performance of the construction sector and economic growth and proffers a lasting solution to the Nigerian government. The study will help contractors, stakeholders, policymakers and government in the country to understand the risks that economic instability poses. This study will also contribute to academic literature by bringing about the relationship between the Nigerian construction sector and economic instability. This study can also serve as a foundation for further research to be conducted in Nigeria.
1.7 Scope of the Study
This study covered contractors, stakeholders, policymakers and government officials in the country. Variables of interest include: economic ‘instability’, causes, effects and solutions in the country. While causes, effects and solutions in the country are independent variables, economic instability is the dependent variable.
1.8 Limitation of the study
This study entailed investigation into a variety of issues to be able to achieve a comprehensive study of the problems; a lot of constraint were encountered in form of data collection, lack of adequate information from the respondents. The main limitation of this survey was the difficulty in getting accurate information from contractors, stakeholders, policymakers and government officials in the country.