IMPACT OF THE YEAR 2020 ECONOMIC RECESSION ON THE CONSTRUCTION INDUSTRY
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IMPACT OF THE YEAR 2020 ECONOMIC RECESSION ON THE CONSTRUCTION INDUSTRY
Chapter one
INTRODUCTION
Background for the Study
The construction industry is critical to economic growth, job creation, and infrastructure development (Akintoye et al., 2021; Eze et al., 2020). However, this industry is vulnerable to economic downturns, which can cause considerable disruptions and challenges (Olawale and Sun, 2021).
The COVID-19 pandemic caused a global economic slowdown in 2020, affecting several sectors, including construction (Olayiwola et al., 2020). Nigeria, being a developing country, experienced significant economic implications during this time.
As a result, the purpose of this research project is to look at the impact of the 2020 economic recession on the Nigerian construction industry, analyse the repercussions, and suggest recovery and resilience solutions.
The Nigerian construction industry is critical to the country’s economy, contributing to job creation, infrastructure development, and overall economic growth (Eze et al., 2020).
However, like any other industry, it is prone to the negative effects of economic downturns, which can stifle growth and stability. In 2020, the world economy experienced a severe recession caused by the COVID-19 pandemic, resulting in widespread decline of economic activity across numerous sectors (Olayiwola et al., 2020).
This worldwide recession had a tremendous impact on the Nigerian construction industry, producing several issues and interruptions.
One of the most significant effects of the economic downturn on the Nigerian construction industry was the prevalence of project delays. Many construction projects were stalled or postponed indefinitely as a result of the crisis.
Reduced economic activity and financial concerns forced project owners and investors to reconsider their objectives, resulting in project delays (Folayan et al., 2022).
These delays harmed the entire operation of the construction industry, affecting income streams, job opportunities, and the timely completion of vital infrastructure projects.
Furthermore, the economic downturn had a significant influence on investments in the Nigerian building industry. Construction investments have declined due to an uncertain economic environment and decreasing investor confidence.
Both domestic and foreign investors grew increasingly risk-averse, resulting in lower capital inflows into the business (Olayiwola et al., 2020).
This drop in investment limited the sector’s capacity to launch new projects, expand operations, and upgrade infrastructure. The cumulative impact was a decrease in construction activity, which exacerbated the industry’s woes.
During the economic downturn, the Nigerian construction industry faced supply chain disruptions. Movement restrictions, lockdowns, and restricted economic activity had a substantial impact on the availability and timely supply of construction materials and equipment (Folayan et al., 2022).
This disturbance has a cascade effect on construction projects, resulting in higher costs, project delays, and lower productivity. Construction companies had to navigate supply chain constraints and explore alternate sourcing options to reduce the impact of disrupted supply chains.
Furthermore, the economic downturn reduced demand for construction services in Nigeria. With economic concerns, reduced consumer expenditure, and a reduction in commercial and residential developments, demand for construction services has significantly decreased (Olayiwola et al., 2020).
This decreasing demand presented issues for construction enterprises, resulting in a drop in income and profitability. To stay in business, construction companies have to adapt toew market conditions by looking for new revenue streams, diversifying their service offerings, and targeting growing areas.
Throughout the 2020 economic recession, Nigeria’s building industry experienced various obstacles. One of the most significant difficulties was a decrease in investment in construction projects.
Economic downturns frequently result in lower private and state investments as investors become more cautious and finance becomes limited (Oladinrin et al., 2020).
This decrease in investment harmed the industry’s growth and development, resulting in a drop in construction activity and project cancellations or postponements.
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