Influence of Macroeconomic Variables on Construction Material Prices in Lagos State: An Auto-Regressive Distributed Lags Approach

Abstract

In Nigeria, many building projects have been abandoned because of increases in the price of the materials involved 
due to the unstable macroeconomic variables prevailing in the country. This study aims to develop an auto
regressive distributed lag model to investigate the effect of selected macroeconomic variables on the price of 
selected building materials in Lagos State and develop policy statements that will benefit all stakeholders in the 
Lagos State construction industry. 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 analysis were quarterly data for 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. In contrast, 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, inflation, and exchange rates positively affect building materials prices. The study recommended a 
reduction in import duties, an exchange rate reduction, and a reduction in the interest rate on bank loans. At the 
same time, the government should promulgate policies that will stabilise the macroeconomic variables in the 
economy.