Impact of Economic Recession on the Expansion of Construction Enterprises in Abuja, Nigeria

Impact of Economic Recession on the Expansion of Construction Enterprises in Abuja, Nigeria

Abstract:

This abstract delves into the concept of economic recession, which transpires when economic activity experiences a decline, leading to negative growth, often accompanied by reduced consumer spending. Such a downturn, also known as a contraction in Gross Domestic Product (GDP) or national outputs, manifests as increased unemployment, diminished wages, heightened inequality, and escalated government borrowing. This investigation centers on the Nigerian economic landscape, where consecutive quarters of negative growth have materialized due to factors such as the depreciation of the Nigerian currency, overreliance on oil, and the absence of diversification. This situation has had a pronounced impact on the construction industry, causing a scarcity of new projects, idle construction equipment, and underutilized infrastructure. Consequently, many construction firms have had to lay off their workforce, resulting in substantial industry redundancy.

The primary objective of this study was to assess the ramifications of economic recession on the expansion of construction firms in Nigeria, aiming to bolster their resilience against the adverse effects of such downturns. Employing a quantitative research approach, the study utilized a questionnaire survey to gather data from 22 construction firms affiliated with the Federation of Construction Industry (FOCI). Additionally, archival data from sources such as the World Bank and the Central Bank of Nigeria bulletin were collected. Data analysis encompassed the application of the Relative Importance Index (RII) and Regression Analysis techniques.

The findings underscored that “Job Loss” stood out as the most impactful consequence of economic recession (RII = 0.89). Furthermore, seven out of the eight measures identified for averting the recurrence of economic recession, ranging from “Expansionary monetary policy – cutting interest rates” to “Higher Inflation Target,” were deemed highly effective (RII = 0.77 – 0.68). Notably, the study unveiled a robust, negative, and statistically significant correlation between micro variables and the number of employees within firms (p = 0.022; R2 = 57%).

In summation, the investigation affirmed that economic recession exerts a significant and detrimental influence on the advancement of construction firms in Abuja, Nigeria, contributing to an increase in unemployment. As a result, the study recommends that both the government and construction firms collaborate to establish a mechanism facilitating the efficacious implementation of preventive measures against the recurrence of economic recession within the Nigerian construction industry.

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