Chief Bola Ahmed Tinubu led federal government has issued a directive requiring all Ministries, Departments, and Agencies (MDAs) under its purview to remit five percent retention fees deducted from contractors’ payments directly to the Central Bank of Nigeria (CBN).
This decision, communicated through a memo signed by the Accountant General of the Federation, OluwaToyin Madein, aims to address persistent complaints from contractors regarding non-payment of their retention fees upon project completion.
Retention fees serve as security for the due performance of contractors under construction contracts, ensuring that necessary obligations are fulfilled.
Previously, contractors had appealed to ministries and the Ministry of Finance for the resumption of retention fee payments, citing delays due to funding constraints.
According to the memo, MDAs must now remit these fees to a designated account at the CBN to safeguard funds until the expiration of a six-month defect liability period following project completion.
In 2022, contractors that had executed contracts with the Federal Ministry of Agriculture and Rural Development appealed to the ministry and the Federal Ministry of Finance to resume the payment of their retention funds.
However, the ministry then cited a lack of funds.
The memo stated, “Following the incessant complaints from contractors over non-payment of their retention fees by Ministries, Departments and Agencies and further to the Treasury Circulars, Ref. Nos. OAGF/CAD/026/V.III/116 -TRY/A9&B9/2017, it has become necessary to issue these guidelines.
“The five percent (5 percent) retention fees deducted from contractors’ payments shall henceforth be remitted to the retention fees account domiciled at the Central Bank of Nigeria.
“The purpose is to safeguard the funds, pending the expiration of the six (6) months defect liability period, after which the MDA could apply for the payment of the money to the contractors).
“MDA shall in their request for payment, prepare and attach a schedule of executed contracts as of 31st December on which retention fee has been deducted in line with the relevant contract agreements, using the attached format.
“The completed schedule must be certified by the Accounting Officer and the Director/ Head of Finance and Accounts and forwarded to the Sub-Treasury of the Federation.
“Henceforth, MDA’s requests for fresh funds for payment of retention fees to contractors will no longer be entertained.
“Furthermore, compliance to the provisions of this circular will henceforth be verified during inspections carried out by the Treasury Inspectorate Department,” the added.
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