Responsiveness of the Construction Sector to Fiscal Policy in Nigeria

Abstract

The influence of fiscal policy measures on the economy is reflective of sectorial outputs like the construction sector industry. However, the extent of the influence in countries such as Nigeria is vague, making their interaction a concern. This study investigated and examined the relationship between the construction sector and selected fiscal policy measures, namely government revenue, public capital expenditure, gross fixed capital formation and deficit finance. Using time series, data of the study variables between 1980 and 2019 were analysed using cointegration estimation and pairwise casualty techniques. The study’s findings showed that there were long-term and short-term relationships between all variables, but they were not significant, except for the government revenue. Similarly, the pairwise Granger causality test confirmed that deficit financing and public capital expenditure had no casualty effect on the construction sector. It is concluded that the construction sector is not responsive to changes in fiscal policies in Nigeria. Subsequently, the study recommends the need for increased public and private capital investment, improvement in revenue generation and efficient use of debt revenue on infrastructure development to strengthen domestic growth across economic sectors.