Pay local contractors
Last week, we learnt that the Federal Government still owes local contractors N1.97 trillion. This figure is disturbing, considering the fact that in the 2016 budget, the Buhari administration plans to pay N1.3 trillion to all domestic creditors. The debt owed local contractors by the three tiers of governments is put at a staggering sum […]
Last week, we learnt that the Federal Government still owes local contractors N1.97 trillion. This figure is disturbing, considering the fact that in the 2016 budget, the Buhari administration plans to pay N1.3 trillion to all domestic creditors. The debt owed local contractors by the three tiers of governments is put at a staggering sum of N2.4 trillion. The National Contractors Association gave these figures while speaking with journalists in Abuja. Its National Chairman, Onuche Okoh, condemned the suffering to which their members are subjected on account of governments’ failure to pay them. The association claimed to have lost 579 members to heart attacks over the years.
“The association wishes to passionately appeal to the president to quickly take a look at the issue of the welfare of contractors over the years, especially on contracts that have been executed,” Okoh said.
We see many reasons why the situation has become this messy. Government does not have schedules for making payments to contractors whenever contract agreements are signed. Contractors are paid only when it pleases the bureaucracy. It could be this year or five years from now. This is one reason why contract sums are inflated beyond reason. But upon completion, contractors experience all forms of inconveniences, especially because they usually take loans from banks to execute projects. By the time payments are made, the interests on the loans might have compounded beyond what the contractors are able to pay. Some of the debts eventually become bad loans. It is for this reason that many banks balk at lending to government contractors.
Another reason is the way contracts and supplies to government agencies are structured. Even before contracts are awarded, all manners of interests are factored into projects. And immediately the mobilization payment is made, individuals within the government remove their own cuts – sometimes up to 15%. Thereafter, they show laxity in tracking the payments due to contractors because they may have already benefitted from the project. They move on to other projects to wreak havoc, thereby leaving government with the debt burden, and many times, uncompleted projects.
We must reiterate that contracts are agreements, which are supposed to be honoured. It is commendable that the Federal Government and even some state governments have reviewed and decided to continue with some projects of the previous administrations. In some of the projects, savings were made, others attracted more cost because ongoing projects were stopped for renegotiations which led to variations and increases due to inflation and remobilization.
However, now that we have a government which promises change, we believe that the entire process should be reworked, followed to the letter and the laws enforced. By so doing, payments to local contractors would be less of a pain. Also, the government should be faithful to the Fiscal Responsibility Act, which demands that relevant funds must be set aside before contracts from projects are awarded. It is also important that all payments should be made within the accounting year.
We urge the governments at all levels to endeavour to source for funds and pay these local contractors. Such payments will be another means of allowing money to circulate among Nigerians the cushion the effects of the current recession. Money paid to local contractors mostly circulates within Nigeria.
It is disturbing that priority is given to the payment to foreign creditors as scheduled. Such funds are transferred to other countries. But our local contractors are ignored. It makes no sense that we should favour others over our own. We must encourage our businesses by empowering contractors with prompt payments, so that they can, in turn, participate and stimulate the economy by providing jobs.