COST FLUCTUATION OF SOME BUILDING MATERIALS IN ENUGU STATE FROM 1999 TO 2009

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  • Name: COST FLUCTUATION OF SOME BUILDING MATERIALS IN ENUGU STATE FROM 1999 TO 2009
  • Type: PDF and MS Word (DOC)
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  • Length: [87] Pages

 

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.

TABLE OF CONTENTS

Title Page – – – – – – – – – i
Certification – – – – – – – – – ii
Dedication – – – – – – – – – iii
Acknowledgement – – – – – – – – iv
Table of content – – – – – – – – v
List of Table – – – – – – – – -viii
Abstract – – – – – – – – – – ix

CHAPTER ONE:
1.0 INTRODUCTION – – – – – – 1
1.1 Background of the study – – – – 1
1.2 Statement of problem – – – – – 3
1.3 Scope and limitations – – – – – 4
1.4 Aim and objectives – – – – – 5
1.5 Research Questions – – – – – 6
1.6 Hypothesis of the Research – – – – 7
1.7 Significant of the study – – – – 8
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CHAPTER TWO
2.0 Literature Review – – – – – 10
2.1 Causes of price fluctuation – – – – 10
2.2 Effects of fluctuation – – – – – 19
2.3 Present Contractual Approaches Fluctuation – 22

CHAPTER THREE
3.0 Research Methodology – – – – 27
3.1 Sampling Technique – – – – – 27
3.2 Data Type – – – – – – – 28
3.21 Primary Data – – – – – – – 28
3.22 Secondary Data – – – – – – 29
3.3 Method of Data Analysis – – – – – 29

CHAPTER FOUR
4.0 Data Presentation and Analysis – – – 32
4.1 Data Analysis – – – – – – – 58
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4.2 Research Question I – – – – – 58
4.3 Research Question II – – – – – 59
4.4 Research Question III – – – – – 60
4.5 Summary of Findings – – – – – 62
4.6 Discussions – – – – – – – 63

CHAPTER FIVE
5.0 Conclusions and Recommendation – – – 67
5.1 Conclusions – – – – – – – 67
5.2 Recommendations – – – – – – 68

REFERENCES – – – – – – – – 72
APPENDIX – – – – – – – – 76

CHAPTER ONE

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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Hi: The change in the prices of building materials has
significant
effect on the cost of building projects.
Hypothesis III
Ho: There has been an upward movement in the trend of
cost fluctuation in building projects for the past ten
years.
Hi: There has been no upward movement in the trend of
cost fluctuation in building projects for the past ten
years.
Because of the problems alluded to this research work,
the above hypothesis was postulated by the researcher to
guide in the data analysis proceedings. These above
hypothesis were all put in both null (Ho) and alternative (hi)
hypothesis.

1.6 SIGNIFICANT OF THE STUDY
This research involves the examination of building
construction cost and its materials price fluctuation. This
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study would be very helpful to the Architects, Builders and
Quantity Surveyors etc. and to the construction industry as
a whole, and it will also act as a good guide or technique for
monitoring and analyzing the rate of fluctuation of
construction inputs in the construction industry.
The study will serve as a reference point upon which
other subsequent research studies will be based on.

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