A PROBABILISTIC ESTIMATE OF INCREASE IN CONSTRUCTION COST

Abstract

This p a p e r examined the tren d s in housing construction cost between the y e a r 2 00 0 -2 0 0 5 fo r Ilorin environs. The method used an a ll in c lu siv e e lem en ts in the comp u ta tio n o f ra te s to obtain u n it rates for a d iv e rsed range o f bill items. The distrib u tio n o f inc re a se in construction cost for a p a rticu la r y e a r related to a base y e a r w as tre a ted as a co n tin u o u s randomized p ro b ab ility distribution for which d e n sity fu n ctio ns were obtained. This meth o d en ab le s the te s tin g o f the validity o f th e comp u ted Central Bank o f N ig e ria (C BN ) in fla tio n indices o v e r the sam e period 2000-2005 for a wide range o f rate items. The stu d y sh ow ed that con stru c tio n c o s t rem a in s on th e increase. Also, th e p a p e r has shown th a t th e inflation index p u b lish ed b y the C en tra l Bank o f N ig e ria ’s real se c to r sta tistic s p o p u la rly used for updating co n stru c tio n cost e stim ates is n ot ap p ro p riate. It is suggested that construction cost indices w o u ld b e most ap p ro p riate for u p d a tin g construction cost estimates, for cost p lan n in g an d for budgeting p u rp o se s. Th e construction cost indices fo r th e sam e period 2000- 2 0 0 5 is also comp u ted . It w as obtained from the comp u ted relativ e frequency distribution o f all p o ssib le increases in cost for a p a rticu la r y e a r related to a base year.