The Relationship Between Nigerian Economic Development Indicators and Affordable Housing Vector Autoregression (VAR) Approach

This study investigates the relationship between Nigerian economic development indicators and affordable housing using a Vector Autoregression (VAR) approach. The persistent housing affordability crisis in Nigeria, characterized by rising housing costs, rapid urbanization, and macroeconomic volatility, underscores the need to understand how economic fundamentals interact dynamically with housing systems. Although prior studies acknowledge the influence of GDP, inflation, and investment flows on housing outcomes, empirical evidence capturing their simultaneous and interdependent effects within the Nigerian context remains limited. The study aims to examine the dynamic linkages between key economic development indicators Gross Domestic Product (GDP), Foreign Direct Investment (FDI), Human Development Index (HDI), unemployment, inflation, and green bond finance (GBF) and the Affordable Housing Index (AHI), while assessing both short-run and long-run effects. Using annual time-series data and a Vector Autoregression (VAR) model, the analysis captures bidirectional causality and system-wide interactions among variables. The results reveal exceptionally high explanatory power, with R² = 0.9999 for AHI and HDI, R² = 0.9922 for GDP, and R² = 0.9769 for FDI, confirming strong macroeconomic-housing interdependence. Forecast accuracy is reinforced by low Root Mean Square Error (RMSE) values. While GDP and FDI exhibit significant positive long-run effects on housing affordability, green finance demonstrates a negative long-run relationship, suggesting structural inefficiencies in allocation. Short-run impacts of inflation and unemployment appear statistically weak, indicating shock absorption through informal housing mechanisms. The study concludes that housing affordability in Nigeria is deeply embedded within macroeconomic stability and human development systems. It recommends integrated fiscal and development policies rather than isolated housing interventions, emphasizing the importance of context-specific economic strategies for sustainable affordable housing delivery.