Correlation between Petroleum Pump Price Volatility and Selected Building Materials Prices of Construction Projects in Nigeria, 2011 – 2020

Abstract

The issue of construction material prices would never cease to exist as building projects are being carried out on regular basis. This study examined the statistical relationship that exists between petroleum crude oil price volatility and prices of selected building materials in Nigeria. These materials include cement, block, tile and reinforcement bars, and were selected via field survey owing to their cost implication to building and importation regularity. Data on Petrol Pump Price Volatility were obtained from the Central Bank of Nigeria (CBN) statistical bulletin and covered a period of 2011 to 2020. The inferential analysis carried out between petroleum pump price and the prices of cement, block, tile and reinforcement bar show the existence of strong positive relationship, with correlation coefficients of 0.872, 0.920, 0.820 and 0.864 respectively. This shows that 1 Naira increase in petrol pump price reflects a similar increase in the prices of building materials indicating that petrol pump price is a strong determinant of construction material prices. This study concludes that there is need for the formulation of appropriate fiscal policies devoid of political sentiments in mitigating the effect of petrol pump price on building material prices. The study therefore, recommends the diversification of the economy through the revitalization of the Ajaokuta Iron & Steel, Itakpe Iron Ore Mining Companies as well as other steel industries which can assist in increasing the local production of building materials and other equipment, and by so doing reducing the effect of petrol pump price as well as curtailing the upshot of other macroeconomic factors on the economy.