The Correlation between Foreign Exchange Rates and Prices of Building Materials in Nigeria, 2011-2017

Abstract

This study was aimed at determining the statistical relationship that exists between the Naira-Dollar exchange rate and the prices of some selected building materials in Nigeria. These materials comprise cement, tiles and reinforcement bars, and were selected via market survey; informed by their cost significance in building construction and frequency of importation. Data on Foreign exchange Rates were obtained from Central Bank of Nigeria (CBN) statistical bulletin and covered a period of 2011 to the 1^st quarter of 2017. The inferential analysis carried out indicated that the relationship between exchange rate and the price of tiles, cement and reinforcement bars are very strong, with correlation coefficients of 0.93, 0.83 and 0.99. Undoubtedly, there are other factors that could account for increase in these material prices and correlation does not necessarily imply causation. The study however recommends that the Nigerian government should formulate policies that are not detrimental to the value of the Naira, such as encouraging and boosting domestic production of goods and services and reducing dependence on imported materials, in order to stabilize the price of building materials, encourage building construction and make housing readily affordable for the citizenry.