Driving Public Investments in Construction Sector for Economic Growth in Nigeria: A Synthesis of Wagnerian and Keynesian Hypotheses

Abstract

This study investigated the relationship between public investments in construction sector and economic growth in Nigeria. The study deployed econometric statistics to examine the existence of Wagner's Law and Keynesian Theory in Nigeria using published economic and construction sector data. It found that federal government capital expenditure influences economic growth negatively (t=-2.837, p(0.0084)<0.05), while the recurrent expenditure on construction sector has a positive and significant long-run and short-run influence (t=10.315, p(0.0000)<0.05) on economic growth with a causal effect flowing from construction expenditure to GDP without feedback. The study further established that the aggregate construction investments have potential to grow the economy regardless of effects of capital expenditure ((F=8.19> I(0)=3.10 and I(1)=3.87); ECM(-1)=-0.196, p=0.000<0.05)); but for corruption, misapplication and diversion of capital project budgets. Although, this study partly confirmed the existence of Keynesian Theory, it cannot conclusively establish that construction investments stimulate economic growth in Nigeria. This signified that Nigerian economic models are defective and/or ineffective in transforming the huge capital spending on construction sector to economic growth, thereby making investment in construction sector an irrelevant strategy for economic policy formulation. It then placed the burden of economic rejuvenation through investments in construction sector on economic policy and decision makers in Nigeria. It recommended for diligence in budgeting and implementation of capital projects as the only way the capital expenditure can contribute to a meaningful economic growth.