DEVALUATION OF NAIRA: EFFECT ON NIGERIA CONSTRUCTION INDUSTRY

Project Abstract

The devaluation of the Naira, Nigeria's national currency, has significant implications for the country's construction industry. This research project aims to investigate the effects of Naira devaluation on the construction sector in Nigeria. The study will examine how the devaluation of the currency impacts construction material costs, project financing, and overall project feasibility. The research will also explore how exchange rate fluctuations influence foreign investment in the construction industry. By conducting interviews with industry experts, analyzing historical data, and reviewing existing literature, this study seeks to provide valuable insights into the challenges and opportunities faced by the Nigerian construction sector in the context of Naira devaluation. The findings of this research will contribute to a better understanding of the dynamics between currency devaluation and the construction industry, offering practical recommendations for industry stakeholders, policymakers, and investors. The construction industry is a vital sector of the Nigerian economy, contributing significantly to GDP and employment. Therefore, understanding the impact of Naira devaluation on construction activities is essential for sustainable industry growth and development. This research project will shed light on how fluctuations in the exchange rate affect construction projects' cost management, supply chain dynamics, and overall competitiveness. Furthermore, the study will explore the strategies adopted by construction companies to mitigate the adverse effects of Naira devaluation, such as hedging against currency risks, renegotiating contracts, or sourcing materials locally. By identifying best practices and lessons learned from past experiences, this research aims to provide practical recommendations for industry players to navigate the challenges posed by currency devaluation effectively. In conclusion, the devaluation of the Naira has far-reaching implications for the Nigerian construction industry, impacting project costs, financing, and investment decisions. This research project will contribute to the existing body of knowledge by offering insights into the effects of currency devaluation on the construction sector and proposing strategies to enhance industry resilience in the face of economic uncertainties. Ultimately, the findings of this study will inform policy discussions and support informed decision-making to promote sustainable growth and development in the Nigerian construction industry.

Project Overview

<p> </p><p><strong>INTRODUCTION</strong></p><ul><li><strong>BACKGROUND OF THE STUDY</strong></li></ul><p>Nigeria with abundance of resources like crude oil etc, is deemed blessed. Her vast resources in commercial quantities have placed her on a high pedestal among oil producing nations in the world. Her oil and gas industry which has been widely described as the nation’s financial lifeline has helped to attain this enviable position. &nbsp; &nbsp; There are journals several to this and about its role and significance in the Nigeria of today. This has birthed the segmentation of the key economic segments in Nigeria. &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; Devaluation originally refers to a sharp fall in currency within a fixed exchange rate. In 1960 after independence, Agriculture, which used to be the pivot of the economy, showed greater decline. This came as a result of the discovery of crude oil with its value to the economy of the whole world.</p><p>The revenue from crude oil appeared to have helped Nigeria economy with impact towards social and economic development than agriculture. This led to the sudden neglect for agricultural activities. The impact of this thus, the contribution of agriculture to the GDP fall to 39.9 percent between 1971 to 1974 to 18 percent with occasional rise within this period the Nigeria devaluation was very high.</p><p>Devaluation is a macro-economic fiscal policy which dwells on deliberate reduction in the value of local currency with the purpose of increasing gain in tradable items, cost of goods and services are cheaper in a nation where there is no currency devaluation . Reduction in prices of goods and services can help stimulate trading activities in a country with overall purpose of enhancing economic growth and development to help alleviate poverty.</p><p>The construction industry is generally responsible for the physical development or the transformation of the environment, which makes the built environment very vital to social economic development of a nation. High construction costs have become a major pointer to the malfunction of the construction Industry in Nigeria today (Uwah 1995). This has manifested on low construction activities and abandoned projects with several consequences on the nation’s socio-economic and technological development. Cement production involves a lot of foreign input in the form of machines and spare parts, thus when the nation’s currency suffers a setback at the foreign exchange market, cement manufacturers simply catch cold.</p><p>Makoju (1995) observes that the devaluation of the naira in the past few years had negatively impacted investment in the manufacturing of cement. The Babangida led administration’s currency devaluation became popular in Nigeria when in 1986 he came up with the structural adjustment programme. This helps achieve a realistic exchange rate for the naira that was overvalued then. This posed an unhealthy threat in the economic growth and development of our nation Nigeria because overvalued currency then worsens balance of payment problem (Godaro 1989) on the basis of this; the nation was encouraged to embrace the devaluation policy as prerequisite for economic recovery.</p><p>&nbsp;</p><p>1.2 <strong>STATEMENT OF THE PROBLEM</strong></p><ul><li>High cost of housing and properties – As a result of the high costs of materials.</li><li>High cost of construction – Nigerian depending on foreign importation.</li><li>Increase in construction project Abandonment – This is the reason many construction projects fail and abandoned in Nigeria.</li></ul><p>&nbsp;</p><p>&nbsp;</p><ul><li><strong>OBJECTIVES OF THE STUDY</strong></li></ul><p>The main aim of the study is to examine the effect of the devaluation of the naira in the Nigerian Construction Industry. To identify the effect of naira devaluation on the construction industry.</p><p>&nbsp;</p><p>1.4 <strong>SCOPE OF WORK</strong></p><p>This study considers the exchange rate between January-2012-october 2015 and its effect on the Construction Industry in Nigeria (Naira, Dollar, Pound).</p><p>&nbsp;</p><p>1.5 <strong>LIMITATION</strong></p><p>Time constraint- As devaluation spand a long time than, what is being considered, financial constraint.</p><p>&nbsp;</p><p>1.6 <strong>DEFINITION OF TERMS</strong></p><p><strong>Naira Devaluation: </strong>It refers to the deliberate lowering of the value of the naira in relation to other country’s currency within the context of a fixed exchange rate management system.</p> <br><p></p>