Remit 5% of contractors’ fees to CBN — FG to MDAs
By Esther Agbo
The Federal Government, through the Office of the Accountant General of the Federation, has directed all Ministries, Departments, and Agencies (MDAs) to remit five percent retention fees deducted from contractors’ payments to the Central Bank of Nigeria (CBN).
This mandate, detailed in a memo signed by the Accountant General, OluwaToyin Madein, tagged OAGF/CAD/026/Vol.V/896, aims to address complaints regarding non-payment of retention fees by MDAs after project completion.
The memo, dated June 27, 2024 was addressed to key government officials, including the Chief of Staff to the President, Femi Gbajabiamila, all ministers, special advisers, service chiefs, and foreign missions.
A retention fund serves as a form of security in construction contracts, ensuring contractors fulfil their obligations. Contractors receive a portion of the total fund upon project completion, with the remaining balance paid after a final certificate confirms all obligations are met.
According to the memo, retention funds constitute a five percent deduction from the total contract sum, held in a separate account by the ministry and paid to the contractor six months after project completion, verification, and certification. Contractors must apply through the procurement department, which then seeks approval from the Ministry of Finance for payment.
In 2022, contractors working with the Federal Ministry of Agriculture and Rural Development appealed for the resumption of their retention fund payments, citing a lack of funds as the reason for delays.
Addressing these issues, the Accountant General 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%) 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, MDAs requests for fresh funds for payment of retention fees to contractors will no longer be entertained.”
Furthermore, requests for fresh funds for retention fee payments will no longer be entertained, and compliance with these provisions will be verified during inspections by the Treasury Inspectorate Department.
