Role of Construction Sector in Economic Growth: Empirical Evidence from Nigeria

Abstract

The construction industry plays an important role in the economy, and the activities of the industry are also vital to the achievement of national socio-economic development goals of providing shelter, infrastructure and employment. It is clear that construction activities affect nearly every aspect of the economy and that the industry is vital to the continued growth of the economy. Surprisingly, the construction industry was left out from the list of major growth drivers of the economy. In order for construction to ably perform this role, there is a need to provide information on its economic value and its place in the overall economy of a country needs to be placed in perspective, if its function is to be fully understood. This study attempted to investigate the relationship between the construction sector and aggregate economy. Time series data from 1990 - 2009 on construction output and Gross Domestic Product (GDP) used for the study were extracted from the United Nation Statistic Division. This paper uses econometric techniques such as unit root test, cointegration test as well as Granger causality test to analyze the significance of construction linkage with the aggregate economy. The result indicates that construction output is Granger caused by GDP, while the construction output also granger causes the GDP. Both GDP and construction output lead each other by one year. The study concluded that the Nigerian construction sector is very important because of its capacity to lead the economy of Nigeria.