INFRASTRUCTURAL DEFICIT AND REAL SECTOR DEVELOPMENT IN NIGERIA

ABSTRACT

This research work is centered on infrastructural deficit and real sector development in Nigeria, and the data type employed was time series data between the period of 1985-2015 and secondary data obtained from the CBN statistical bulletin and the least square was employed using E-View 8.0 package in running the regression in other to evaluate the data obtain from research work. From the analysis carried out the researcher found out that infrastructural deficit have a negative impact on real sector development and economic growth and also a positive relationship between the variables. From this work it is also discovered that lack of growth in the real sector and the economy can also be attributed to infrastructural deficit faced in the country and as such the government should invest more on infrastructural development which will also lead to real sector development and economic growth. Finally, the government should invest more on real sector such as building-construction, and industrial sectors which are very significant in growing the economy.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Recently, infrastructural deficit has become one of the challenges facing the Nigerian economy. Government over the years has embarked on different policies in order to boost infrastructural development in the country.

The infrastructural deficit is the result of a steady decline in government infrastructure spending, combine with a steady increase in the cost of building additional infrastructure. These national deficit have actually truncated the real sector revolution.

The real sector of Nigerian economy has arguably been the engine of the country’s economic transformation over the years. Importantly, the sector has metamorphosed into an emerging industrial work house from a hitherto rudimentary agrarian economy that can be hardly ignored. A plethora of factors including infrastructural gap, inefficiency inn public sector project management and services delivery; the resource curse of oil exploration, dysfunctional macroeconomic policy environment, among others have obviously truncated the real sector economyOkoh et al (2013).

Nevertheless, government have continued to play a catalytic role through the enunciation of policies and provisioning of financing havens and infrastructural spending to evocate the sector to levels that can make Nigeria an economic renaissance. Although, recent numbers suggest resilient growth (especially at the heels of recent trepidation in the global economy), it is incontrovertible to see that currently, most countries that were at then same or even lower stage of development decades ago such as Malaysia have transformed their real sector beyond mean proportions. The issues of real sector development in Nigeria remain intricate and reflect a mix of both domestic and international characteristics. The real sector comprises of agriculture, industry, building and construction. Wholesale and retail and the service sectors, while from the international front, development in the international oil market and the oil and gas sector are influenced by global financial activities. Thus, the policy the environment must be adequately focused toward enhancing the capacity of the private sector to drive real sector activities and hence achieve desirable level of growth.

There is no gain saying the fact that complex interaction of agent and economic activities pose the challenge of clearly understanding the adjustment mechanism required to attain optional level of outputKlien (1983). Although not exhaustive, econometric model are helpful tools that could be used in the determination of quantitative signpost to assist policy makers in formulating and implementing sound policies. Formulation and implementation of sound economic policies had made differences between developed, emerging and developing economies and econometric models have played a part in these differences.

In Nigeria, several models have been developed to assist formulation and implementation. These economic models could be dated back to the work of Carter (1960), who constructed input-output table to aid the formulation and implementation of first national development plan. Following this introduction; the next section focus on the literature review, theoretical and empirical review for the study. Section 3 examines the methodology to be adopted for the study and 4 discuss the empirical result and finally the section 5 present the summary and conclusion.

1.2       STATEMENT OF PROBLEM

Nigeria suffers from a housing deficit of over 17 million units for his teeming population and the poor state of infrastructure in the country even worsens the plight of the masses. At the moment there is a rising cost in building materials which has adverse effect on the construction industry.

In every country, infrastructural development impacts on sectors such as power, works, housing and transport. Until recently, the weakening of the Naira against major currencies has resulted in inflation and increasing levels of interest rates that seem to have adverse effects on the real estate sector

Property developers and buyers are faced with challenges in meeting finance costs due to high interest rates. As the population growth rate increases, the government and private sector players have attempted to meet the infrastructure needs of the residents. Albeit, there is still a lot that needs to be done in the aspect of infrastructural development.

Infrastructural development has a direct impact on real sector values. Land prices in areas such as Lagos Island where large infrastructure projects are taking place have increased rapidly as property sellers anticipate the demand for more land (CBN statistics 2015).

Despite the real sector development in Nigeria the performance in Nigeria economy in terms of growth has been dismal. Decades of underinvestment in basic infrastructure have produced a variety of bottleneck across transportation, water, light and communication network. Available information reveals that they have been declining over the past fifty years falling from 3.1% of GDP to 2.4% of GDP in 2007. Infrastructure spending averaged 2.8% of GDP from 1960-1980 and 2.4% of GDP or $55 billion as measured in 2010 GDP.

Most of the decline was made up by a decline in federal spending, which fell from 0.9% of GDP from 1960-1980 to 0.6% of GDP from 1990-2007. With all these one can actually say that infrastructural deficit have lead to dismal in both the real sector economy and economic growth of the country.

The question that still arises is which or whether any of these factors will contribute to economic growth. Those aim to contribute to the debate by answering the following question.

Given the above identified problems existing in an economy running a deficit and considering the nature of infrastructural deficit in the face of the real sector in an economy, the research will attempt to answer the following questions:

1·     what impact does infrastructural deficit have on real sector development in Nigeria?

2·    what is the causal relationship between infrastructural deficit and real sector development in Nigeria?

 

1.3       RESEARCH QUESTIONS

1. What is the effect of infrastructural deficit on the real sector development and economic growth?
2. Is there any causal relationship between infrastructural deficit and real sector development?
3. Is there any relationship between real sector development and economic growth?

 

1.4       OBJECTIVES OF STUDY

The broad objective of this research work is to analyze the impact of infrastructural deficit and real sector development on the Nigerian economic growth.

1. To determine the impact of infrastructural deficit on the real sector growth.
2. To investigate the relationship between infrastructural deficit and real sector development
3. To determine the relationship between real sector development and economic growth

 

 

1.5       RESEARCH HYPOTHESES

H_O1: Infrastructural deficit have no significant impact on real sector development and economic growth

H_O2: There is no relationship between infrastructural deficit and the real sector development.

Ho₃: There is no significant relationship between real sector development and economic growth.

1.6       SIGNIFICANCE OF STUDY

This study will contribute immensely in aiding the government policy makers, economic planners, researchers, the academies generally. This work will provide an insight and understanding to the government on how to be prudent in spending public fund on infrastructure and the real sector that will bring about economic growth and development. It is also of immense help in providing insight and knowledge to the general public, economic planners and policy makers on the impact of infrastructural deficit and real sector development on the economic growth in Nigeria.

To academia, the finding of the study will contribute to the available literature on the current infrastructural deficit and real sector development in Nigeria and its level of contribution to GDP. Based on our empirical finding and analysis the result of the study will be of immense benefit to research who will rely on their contribution to existing knowledge for further research.

                                                           

1.7 Scope of the Study                                                                     

This research work will cover the period of 1985 to 2015 following the limited scope of this research work, data will be sourced from secondary data from CBN statistical bulletin.