Foreign Exchange Rates and Infrastructure Development in Nigeria

Abstract

Purpose – Infrastructural development is germane for the socioeconomic growth of nations. Nigeria’s infrastructural deficit has been attributed to poor infrastructure planning, mistiness in public procurement, over-dependence on oil revenues and fluctuating exchange rate. The purpose of the study is to examine the relationship between foreign exchange rate and cost of road infrastructural development in Lagos State.

Design/methodology/approach – A quantitative research approach was adopted in the study. Data on cost of road infrastructure in Lagos was gathered from the archives of registered Lagos Sate civil engineering consultants and contractors. Data on foreign exchange rate was obtained secondarily from the publications of the Central Bank of Nigeria (CBN) and Nigeria Bureau of statistics using a data collection proforma for a period of seventeen years spanning from 2000 to 2016, indicating the inception of democracy in the Nigerian political agenda and the end of military rule in Nigeria.

Findings – Fluctuation in foreign exchange rate had 49.6% impact on the cost of road infrastructural development and is responsible for the high cost of infrastructural development in Nigeria.

Research limitations– Only Road infrastructure project cost for Lagos, Nigeria was considered in the study

Theoretical/Social/Practical implications – Unstable foreign exchange rate directly affects cost of road infrastructure, resulting in increased cost while widening the infrastructure deficit.

Originality/value – Periodic study of foreign exchange rates and its attendant implications for infrastructure development can provide policy direction towards closing the infrastructural deficit in Nigeria