Abstract
This study empirically examined the interrelationship between the construction sector, oil prices, and the actual gross domestic product (GDP) in Nigeria. Using annual economic data from the National Bureau of Statistics (NBS), the OPEC Annual Statistical Bulletin, and econometric statistics, we found that although very strong positive and significant correlations exist between the construction sector output and total GDP output (0.934), the construction sector output and oil prices (0.856), and the total GDP output and oil prices (0.822), these linear relationships only exist for a short time. However, these relationships do not result in any direct causal influence on each other, except for the uni-directional Granger causal relationship that flows from the total GDP output to the construction sector output, which implies that economic activities of other major non-oil sectors stimulate the construction activities in Nigeria. Thus, we argue that neither the construction sector nor the oil prices directly influence the aggregate economy; rather, the other sectors’ activities stimulate the construction sector in Nigeria. Two policy recommendations for achieving the Federal Government’s medium term Economic Recovery and Growth Plan (ERGP) are suggested: (1) the Nigerian government should de-emphasize overreliance on the oil sector through policy readjustment and (2) an urgent need for economic diversification in Nigeria exists, since we revealed that an increase in the aggregate GDP output is due to the activities of other non-oil sectors.
Highlights
Nigeria recently lost its number one position as the largest economy in Africa to SouthAfrica, restructuring of the Nigeria National Account through rebasing has helped to improve Nigerian economic prospects
The result of this study shows that only the total gross domestic product (GDP) output that Granger Causes the construction output without feedback, and no Granger causal relationship exists between the total GDP output and the oil prices; and between the construction output and the oil prices
The results of this study are not surprising, as the data collected from various National Bureau of Statistics (NBS) reports and the OPEC Annual Statistical Bulletin were used to empirically examine the interrelationships between the construction sector output, the total GDP output, and the oil prices in Nigeria to measure the nature and extent to which the construction sector and oil prices influence and relate to the Nigerian economy in terms of aggregate GDP output
Summary
Africa, restructuring of the Nigeria National Account through rebasing has helped to improve Nigerian economic prospects. Since the rebasing of the GDP, PricewaterhouseCoopers Limited (2017) showed that the Nigerian economic structure has become more diversified, with oil becoming less relevant, and accounting for. Both the oil and construction sectors play significant roles in the development of any economy. According to Khan et al (2013), the products of these two sectors are indispensable for industry, including industrial processes and outputs. Demand for these commodities continues to grow due to their various uses and direct links to the industry and social well-being of a society
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