ABUJA, NIGERIA – The Federal Government, through the Office of the Accountant General of the Federation, has mandated all Ministries, Departments, and Agencies (MDAs) to remit 5 percent retention fees deducted from contractors’ payments to the Central Bank of Nigeria (CBN). This directive, outlined in a memo signed by Accountant General OluwaToyin Madein, aims to address complaints over the non-payment of retention fees by MDAs upon the completion of projects.
The memo, tagged OAGF/CAD/026/Vol.V/896, was issued on June 27, 2024, and addressed to key officials including the Chief of Staff to the President, Femi Gbajabiamila; all ministers; Special Advisers; Service Chiefs; and Foreign Missions, among others. It was obtained by our correspondent on Wednesday.
A retention fund serves as a security measure in construction contracts, ensuring the contractor fulfills their obligations. Typically, 5 percent of the total contract sum is deducted and kept in a separate account. The contractor receives a percentage of this fund upon project completion, with the remaining balance paid after six months, following verification and certification of the project’s fulfillment.
Contractors apply for the release of these funds through the procurement department of the ministry, which then seeks approval from the Ministry of Finance.
The memo highlighted the persistent complaints from contractors regarding non-payment of their retention fees by MDAs. In response, the OAGF issued new guidelines to ensure proper handling and payment of these fees.
“Following 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 memo stated.
The guidelines specify that the 5 percent retention fees deducted from contractors’ payments should now be remitted to the retention fees account at the CBN. This measure is intended to safeguard the funds until the six-month defect liability period expires, after which MDAs can apply for payment to the contractors.
MDAs are required to prepare and attach a schedule of executed contracts as of December 31 on which retention fees have been deducted, using the provided 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.
The memo further states that requests for fresh funds for payment of retention fees to contractors will no longer be entertained. Compliance with this circular will be verified during inspections carried out by the Treasury Inspectorate Department.
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