FACTORS AFFECTING COST OF CONSTRUCTION IN NIGERIA

Project Abstract

The construction industry in Nigeria has experienced significant growth over the years, with various factors influencing the cost of construction projects in the country. This research aims to identify and analyze the key factors affecting the cost of construction in Nigeria. By conducting a comprehensive literature review and utilizing data from various sources, this study examines how factors such as inflation, exchange rates, government policies, material costs, labor costs, and project location impact construction costs in Nigeria. The findings reveal that inflation plays a significant role in driving up construction costs, as it affects the prices of materials and labor in the industry. Exchange rate fluctuations also have a considerable impact on construction costs, especially for projects that rely on imported materials and equipment. Government policies and regulations, such as licensing requirements and permits, can lead to delays and additional expenses, thereby increasing the overall cost of construction projects. Material costs, including the prices of cement, steel, and other building materials, are major cost drivers in construction projects. Fluctuations in material prices can significantly impact project budgets and timelines. Labor costs, determined by wages, skill levels, and availability of skilled workers, also influence construction costs in Nigeria. The shortage of skilled labor in certain regions can lead to increased labor costs and project delays. Furthermore, the location of construction projects in Nigeria can impact costs due to varying infrastructure, accessibility, and logistical challenges. Projects in remote areas may incur higher transportation costs for materials and labor, while projects in urban areas face congestion and high land prices, driving up overall project costs. In conclusion, this research highlights the complex interplay of factors affecting the cost of construction in Nigeria. By understanding these factors and their implications, stakeholders in the construction industry can better manage project budgets, mitigate risks, and improve overall project outcomes. Policymakers can also use these findings to develop strategies that promote cost-effective construction practices and support the sustainable growth of the construction industry in Nigeria.

Project Overview

<p>&nbsp;<b>1.0 INTRODCUTION&nbsp;</b></p><p><b>1.1 BACKGROUND STUDY&nbsp;</b><br></p><p>The growing need for construction of all types coupled with a tight monetary supply has provided the construction industry with a big challenge to cut cost. According to Mendelson and Greenfield (1996) the remaining part of the twentieth century would involve corporations, institutions and government in a race to survive. The attendant dwindling economic fortune of nations economies around the World have geared up the participant in these sectors (the client in particular) to take up the challenge of ensuring efficient use of their resources to obtain value for money in terms of performance. The total cost of construction in normal circumstances is expected to be the sum of the following cost: Materials, Labour, Site Overheads, Equipment/Plant, Head office Cost and Profit but in many parts of the world particularly in Nigeria, there are other costs to be allowed for. These costs according to Mbachu and Nkado (2004) have obvious negative implications for the key stakeholders in particular, and the industry in general. To the client, high cost implies added costs over and above those initially agreed upon at the onset, resulting in less returns on investment.&nbsp;</p><p>To the end user, the added costs are passed on as higher rental / lease costs or prices. To the consultants, it means inability to deliver value - for - money and could tarnish their reputation and result in loss of confidence reposed in them by clients. To the contractor, it implies loss of profit through penalties for non- completion, and negative word of mouth that could jeopardize his/her chances of winning further jobs, if at fault. The proposed work will investigate and report the other costs to be allowed for, which are the basic factors affecting construction cost in Nigeria and also proffer solutions to how construction cost can be minimized. <br></p><p> <b>1.2 STATEMENT OF PROBLEM</b></p><p>The demand for more construction of all types, coupled with a tight monetary supply has provided the construction industry with a big challenge to cut costs. The problem of high contract costs of all aspects of construction is becoming obvious. Consequently, substantial increases are being observed in projects. This substantial increase has brought about loss of client confidence in consultants, added investment risks, inability to deliver value to clients, and disinvestment in the construction industry. <br></p><p><b>1.3 AIMS AND OBJECTIVES OF STUDY</b><br></p><p>The aim of the study is to find out the factors affecting construction cost in Nigeria and proffer solutions to how construction cost c an be minimized. The objectives of the study are as follows:&nbsp;</p><p>1. To identify the main factors affecting construction cost in Nigeria.&nbsp;</p><p>2. To determine the severity rank of the factors amongst clients, consultants and contractors.&nbsp;</p><p>3. To determine the agreement ranking factors between clients, consultants and contractors.&nbsp;</p><p>4. To proffer solutions on how to minimize construction cost in Nigeria. <br></p><p> <b>1.4 RESEARCH HYPOTHESES</b></p><p>To test the hypothesis:&nbsp;</p><p>1 (a). Ho: Contractors and Clients do not generally agree on the severity rank of the factors affecting construction cost in Nigeria&nbsp;</p><p>1 (b). H1: Contractors and Clients generally agree on the severity rank of the factors affecting construction cost in Nigeria&nbsp;</p><p>2 (a). Ho: Clients and Consultants do not generally agree on the severity rank of the factors affecting construction cost in Nigeria&nbsp;</p><p>2. (b) H1: Clients and Consultants do not generally agree on the severity rank of the factors affecting construction cost in Nigeria&nbsp;</p><p>3. (a) Ho: Consultants and Contractors do not generally agree on the severity rank of the factors affecting construction cost in Nigeria&nbsp;</p><p>3. (b) H1: Consultants and Contractors generally agree on the severity rank of the factors affecting construction cost in Nigeria.<br></p><p> <b>1.4 SIGNIFICANCE OF THE STUDY</b></p><p>An assessment of the study would enable Clients, Contractors and Consultants give an economic approach to construction work such that they would be able to identify the dominating factors leading to high construction cost in Nigeria. The application of the solutions proffered to minimizing construction cost would restore client’s confidence in consultants, reduce investment risks, and generally boost the viability and sustainability of the industry.<br></p><p><b>1.5 SCOPE AND DELIMITATION OF STUDY</b></p><p>The scope of this research is limited to identification of essential factors affecting construction cost and proffering solutions on how to reduce construction cost in Nigeria. The study is limited to projects in the Lagos metropolis of Nigeria because there is easy access of information in the Lagos metropolis by the researcher. Target respondents for this study are the principal actors in the construction industry namely: the Client, the Consultant and the Contractor. <br></p>