Influence of Macroeconomic Variables on Construction Material Prices in Lagos State: An Auto-Regressive Distributed Lagos Approach
Abstract
In Nigeria, many building projects have been abandoned because of an increase in the price of the materials that are involved, due to the unstable macroeconomic variables prevailing in the country. The aim of this study is to develop an auto-regressive distributed lag model so as to investigate the effect of some selected macroeconomic variables on the price of some selected building materials in Lagos State, and also to come up with some policy statements that would assist every stakeholder in the construction industry in Lagos State. The research methodology adopted for this study was an ex-post facto survey research design because it was based on secondary data. Data used for the study were quarterly data for a period of twelve years ranging from 2008 to 2019, obtained from published sources. The data for the price of building materials were obtained from the Nigerian Institute of Quantity Surveyors (NIQS), Quarterly Journal, and Guardian Newspaper of Nigeria; while the data on the macroeconomic variables, which are inflation rate, interest rate, and exchange rate, were extracted from the Annual Reports and statistical bulletins of both the Central Bank of Nigeria (CBN), and the National Bureau of Statistics of Nigeria. The data collected were processed using E-view, an econometric statistical software package; the suitability of the package is enhanced by the interactive nature of the programme, which makes it user-friendly and time efficient. The statistical tools used for the study were the ordinary least square method, correlation, and auto-regressive distributed lag model. The result showed that interest rate, inflation rate, and exchange rate have a positive effect on the building materials prices. The study recommended a reduction in import duties, exchange rate reduction, and reduction in interest rate on bank loans, while the government should promulgate policies that will stabilize the macroeconomic variables in the economy.
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