Department of Civil Engineering Faculty of Engineering & Technology University Of Ilorin Ilorin

CVE 581 Construction Engineering

TERM PAPER

TOPIC: An assessment of the contribution of construction Industry to the Nigeria GDP

Name: Okeola Abass Abayomi Matriculation No: 09/30GB083 Date: Monday, November 17, 2013

Abstract. It is widely known that the construction industry plays a vital role in the socio-economic development of Nigeria, this is shown in the huge sum of money allocated to the construction of capital projects. between 50 and 60 percent of most countries capital formation is in the construction industry; houses, hospitals, schools, power stations, roads, railways, dams, ports and so on. Most studies focuses on employment creation while others look into the effect of the construction industry on other sectors of the economy.

According to the Nigerian National Bureau of Statistics, construction industry is a large employer that accounts for more than 5% of the total labor force. It also accounts for 69% of fixed capital formation, meaning that an estimated 70% of the total net capital investment in the country goes to the sector. Due to the enormous amount of resources invested in the construction industry, it becomes imperative to know how the industry affects the economy of the country through an assessment of the Gross Domestic Product. The GDP gives an indication of how healthy the economy of a county is, economic production and growth, what GDP represents, has a large impact on nearly everyone within that economy, when the economy is healthy, you will typically see low unemployment and wage increases as businesses demand labor to meet the growing economy. A significant change in GDP, whether up or down, usually have a significant effect on the people living in the country. Hence, this paper studies the role played by the construction industry in the GDP of the Nigeria.

Keywords: construction industry, economic development, GDP.

1.0

Introduction

Gross domestic product (GDP) is the market value of all officially recognized final goods and services produced within a country in a given period of time. GDP per capita is often considered an indicator of a country's standard of living. It is one the primary indicators used to gauge the health of a country's economy. The gross domestic product of Nigeria is made up of the following sectors; Agricultural, Building and construction, Industry, whole sale and retail trade and services (Anyanwu and Ibekwe, 2013). Usually, GDP is expressed as a comparison to the previous quarter or year.

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There are several methods that can be used to calculate GDP; either by adding up what everyone earned in a year (income approach), or by adding up what everyone spent (expenditure method). Logically, both measures will arrive at roughly the same total. 2.0 Importance of construction industry

The importance of the construction industry in the national development cannot be overemphasized considering the fact that at least 50% of the investments in various development plans is primarily in construction. It is the next employer of labour after agriculture in underdeveloped countries (Okeola, 2012). Factors aiding the growth of this sector include massive demand for buildings across all sectors of the economy, the focus on infrastructural development by state and federal governments, the adoption of privatization and commercialization as instruments of federal government policy, and the tightening of regulations relating to how business is done in Nigeria. Buildings and infrastructures are vital inputs for economic activity leading to economic growth and increased incomes in the short term, and national development in the long term. Construction activity has extensive linkage, effects, and stimulates activities in other sectors of the economy from which the industry obtains its inputs, such as manufacturing, commerce, finance and business services. This contributes further to economic growth and development, implying that investment in construction has significant multiplier effects. Moreover, construction provides employment opportunities in the form of direct employment in the industry and part-time work. Thus, construction workers are effective consumers in the economy, further stimulating activities in other sectors and raising incomes generally. Furthermore, construction is location specific. Thus, the employment generation potential and stimulation of the local economy can be realized in all parts of the country. (Mohammed and Dahiru, 2012).

3.0

Contribution of construction industry to GDP

There is little doubt that a number of developing countries have seen a dramatic increase in both output and employment in the construction industry in the past 30 years (Manalo, 2000). Construction activity is closely related to economic growth. Numerous studies have shown that construction output grows particularly fast (Strassmann, 1970).Output from the construction industry is a major and integral part of the national output, accounting for a sizeable proportion in the Gross Domestic Product (GDP) of both developed and underdeveloped countries (Tse, et al).

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(Lowe, 2003) further stated that the value added of construction is in the range 3% to 6% for underdeveloped economy. Physical infrastructure is the lifeblood of economy and social growth, it represents massive capital investment, and it is of utmost importance to government, business, and the public at large (Okeola and Salami, 2013).The value of commercial buildings is much more than the sum of their construction outlays or their assessed valuation. Construction and operations create a ripple effect in the economy (Fuller, 2011). This contribution consists of annual direct spending for new development, construction and annual expenditures to operate existing buildings. Additional important economic benefits can also be derived from the re-spending of the salary and wages supported by direct construction and operating outlays and purchases of construction related materials and services from various suppliers. The combination of these direct and indirect outlays constitutes the contribution to the GDP. In countries where wages are low and there is mass unemployment, all employment opportunities are welcome and the Construction industry has no difficulty attracting labour. It could potentially create more employment for the citizens of the country if more contracts are awarded to capable and qualified indigenous contractors. Construction industries have input in other sectors such as manufacturing and tourism, when one looks into factories and hotels being built. The factories constructed produce goods that aid foreign exchange and improve the purchasing power of naira while the hotels among other great projects like the TINAPA Calabar serve as tourist attraction for tourists thus contributing positively to the GDP of the country. The total length of federal Government highway roads in Nigeria is 34,340.90km (Kwara state bureau of statistics) Like many economic activities that are reliant on the use infrastructures, the transportation sector which is a sub set of the construction industry is required to be highly efficient because they go a long way in providing economic benefits that result in better accessibility to markets, employment and additional investments. Furthermore, Nigeria being a maritime nation and huge consuming nation rely heavily on the construction industry for the construction and maintenance of its seaports. These seaports act as a pathway for the importation and exportation of goods and services. They also attract foreign investor into the maritime sector of the economy contributing to the GDP of the country through their various economical activities.

Governments efforts to improve transportation network and its port reform initiatives will have immediate impact on Wholesale and Retail Trade in Nigeria, as goods and human beings can easily

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move in more convenient and affordable way. The Lagos-Kano railway freight line has been opened. Also, the Lagos State government is currently working to interconnect the state with light rail system while work is ongoing to open up Nigeria to West African countries through rail. This will promote Wholesale and Retail Trade across the country and the West African Sub-region, adding positively to the GDP.

4.0

Conclusion

Construction industries play a vital role in the economy of most African countries including Nigeria. Though the contribution of the industry to the GDP of the country may seem to be small when compared to other sectors, yet it cant be overlooked. With the right attitude on the part of the government, private individuals, contractors and the general public as a whole the industry can contribute immensely to the GDP of Nigeria. References 1. Agung, A.W. (2000) The Contribution of the construction industry to the economy of Indonesia (13) 2 . 2. Aniekwu, A.N. (2002) Evolving a Viable Construction Industry for Nigeria. Botswana Journal of Technology. (11)1. 3. Anyanwu, S.O. Ibekwe U.C Structure and Growth of the Gross Domestic Product, Implications for Small-scale enterprise in Nigeria 4. Dahiru .A. Inuwa Y.M. (2012) The Roles of Researchers in the Construction Sectors Towards Achieving the Millennium Development Goals School of Environmental Technology Abubakar Tafawa Balewa University Bauchi, Nigeria 5. Fuller .S.S (2011) How Office, Industrial and Retail Development and Construction Contributed to the U.S. Economy. Center for Regional Analysis George Mason University, Fairfax,Virginia 6. Okeola .O. (2013) Construction Engineering lecture note, Department of Civil Engineering, University of Ilorin. 7. Okeola O. G. Salami A.W(2012) "A Pragmatic Approach to the Nigerias Engineering Infrastructure Dilemma" Epistemics in Science, Engineering and Technology, Vol.2 , No.1 , 55-61 8. Oladinrin, D.R. Ogunsemi, I.O. Aje (2012) Role of Construction Sector in Economic Growth: Empirical Evidence from Nigeria. FUTY Journal of the Environment (7)1 9. Stephen, S.F. (2011) How Office, Industrial and Retail Development and Construction Contributed to the U.S. Economy in NAIOP Research Foundation. 10. Strassmann W.P (1970) The Construction Sector in Economic Development Volume 17, Issue 3,
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