Developing a Construction Cost Index for Nigeria: A Multizone Econometric Approach

The absence of a reliable, regularly updated national construction cost index represents a fundamental information gap that undermines the accuracy of public and private sector construction budgeting, contract price adjustment, and investment appraisal in Nigeria. This study develops a construction cost index for Nigeria using a multizone econometric approach. A positivist research paradigm underpins the study, with primary data collected from 312 quantity surveyors, contractors, material suppliers, and labour market agents across all six geopolitical zones over a 36-month data collection period. Multivariate econometric modelling, including vector autoregression, cointegration analysis, and hedonic price modelling, was applied to construct composite zone-level and national cost indices. Findings establish that construction cost dynamics vary significantly across Nigeria's geopolitical zones, invalidating the use of a single national index for local project appraisal. The study demonstrates that material costs, particularly cement and steel, contribute 48% of composite index movement, followed by diesel at 19% and unskilled labour at 14%. The resulting Nigeria Construction Cost Index (NCCI) is validated against a holdout dataset from 180 completed projects, achieving a mean absolute percentage error of 6.3% in cost prediction. This study makes an original methodological and empirical contribution by providing Nigeria's first rigorously constructed, geographically differentiated construction cost index. Policy recommendations address the institutional home, governance, and quarterly publication mechanism for the NCCI. Keywords: construction cost index, Nigeria, econometric modelling, cost prediction, quantity surveying