ABSTRACT

Over the years, there has been an increasing cost of building projects. This work aimed at examining the extent of fluctuation trend in the prices of materials used for building projects and its cost from 1999 to 2009, by establishing the trend in building material prices over the years, providing price analysis of these materials which would identify significant variances on the cost of building projects and then foster remedial measures for fluctuation to be tackled. This research is important as it would help in the control of cost of building projects with respect to its inflation. Hence “Price Relative Index” was used as a tool for analyzing the data gotten from survey done in five major building material markets in Enugu state. “Average Price Relative Index” was equally use for further analysis. It was discovered that there has been a tremendous instability in material prices over the years which in turn led to the cost fluctuation of building project and its subsequent inflation as materials take a higher percentage in the overall building cost. It is recommended that government policies should be made not to have sporadic effect on material prices and also, measures to be taken to tackle inflation and exchange rate in the country.

CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Right from the earliest times, shelter remains the second most needed amenity by man after food. This need for shelter by man explains the origin of building construction. These days, buildings are not needed only for residential purposes but for other uses like offices, schools, industries and hospitals etc.

With the growth in the construction industry, cost of construction products becomes an important factor. People now recognize the need for having ideas of what a new building will cost. Hence the need for cost fluctuation in building projects and its control becomes very important during construction.

The Longman Dictionary defines fluctuation as a sudden change in price such as amount etc. in Nigeria, just like in

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some other countries of the world, sharp increase in the prices of most inputs to construction like in areas such as materials, components and labour is often experienced at relatively short time or notice. Since construction products take some time to come by, those changes tend to increase the cost of building execution. Therefore, fluctuation as it applies to the construction industry is a terminology used to denote changes in the basic price of labour, goods and materials during a project execution.

According to Oforeh (1991), “the term fluctuation is frequently used in economic analysis to explain the unstable (up and down) nature of prices of goods and services over a given period of time”. It can be seen that fluctuation has become a trend in the industry which can not be neglected as the result is not favourable to the stakeholders in the construction industry.

Turner (1979) stated that a graphic display of the unstable (up and down) nature of goods and services over a

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given period of time by economists and statisticians produces the so called “scatter” diagram from which a line of “regression” is obtained to give a clearer picture of the general behaviour or trend in the price movement. The trend can also be obtained by the methods of moving averages. The general trend in prices often shows upward movement (although with varying gradients) and this may be the reason why the term fluctuation has come to be associated or is always construed to mean price increase.

1.1 STATEMENT OF PROBLEM

As a result of the unsteady nature of prices of materials, components and labour cost as it pertains to building projects, initiating a project by a client or an organization requires a large measure of resources to produce a result or an end product different or precisely, higher than the estimated. Hence, most building projects in Nigeria run above estimated cost over time due to inflation.

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Moreover, in this day of ever increasing cost, majority of clients of building projects are insisting on projects being executed to give maximum value for money-tending towards ways in which these fluctuations can be tackled, so that projects will be executed within the estimated cost. This necessitates a reform and improvement on the activities in the Nigerian construction industry and in the policies of both federal and state government.

1.2 SCOPE AND LIMITATIONS OF THE STUDY

As the topic suggests, the scope of this study is limited to the fluctuations in the prices of materials commonly used in the course of caring out building projects. This dissertation is with particular reference to some significant materials used for building projects.

Enugu state was chosen as my area of study because of its centrality and access proximity to States around.

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Enugu is a former regional head-quarters and it is the head of South-east geopolitical zone. I have studied Enugu and discovered a lot of pronounced projects going on which requires materials estimation. Finally, in Enugu, there are standard building materials markets where choices could be made in terms of where and what to buy. Besides the wider range of building materials markets there, the traders are very understanding and ready to feed one with any information needed for any research. These are what made me choose Enugu as my area of study. The study focuses on the prices of ten (10) significant materials used for constructing buildings, from 1999 to 2009. The study also examined the causes and effects of fluctuation on building project delivery and attempts to foster remedial and reasonable solution to tackle it.

1.3 AIM AND OBJECTIVES OF THE STUDY

The aim of this research work is to examine the extent of cost fluctuation trend in the prices of materials used for

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building construction from 1999 to 2009 with particular reference to some significant materials used in construction with the following objectives:

1.          To establish a price trend in building materials prices from 1999 to 2009, which would identify significant variances on the cost of building projects over the years?

2.          To foster remedial measures to control cost fluctuation in building project delivery.

3.          To provide basis for further research work on cost fluctuation in building projects delivery.

1.4 RESEARCH QUESTIONS

Upon the identification of the above problems and objectives, it is imperative to ask the following questions to help give solution to the problem.

1.          Is there fluctuation in the prices of materials used for building project from 1999 to 2009?

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2.          Does a change in the prices of these materials have any significant effect on the cost of building projects?

3.          What is the trend of cost fluctuation in building projects delivery for the past ten years?

4.          How could this cost fluctuation be tackled?

1.5 RESEARCH HYPOTHESIS

Hypothesis I

Ho: There is no fluctuation in the prices of materials used for building projects from 1999 to 2009.

Hi:     There is fluctuation in the prices of materials used for building projects from 1999 to 2009.

Hypothesis II

Ho: The change in the prices of building materials does not have any significant effect on the cost of building projects.

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