FG Directs MDAs to Remit 5% Contractors’ Retention Fees To CBN
All government owned Ministries, Departments, and Agencies have been directed by the Federal Government to remit five percent retention fees deducted from contractors’ payments at the Central Bank of Nigeria.
The order was contained in a memo released through the Office of the Accountant General of the Federation, signed by the AGF, OluwaToyin Madein, tagged OAGF/CAD/026/Vol.V/896.
The memo said the move became necessary following complaints over non-payment of retention fees by MDAs upon completion of projects by contractors.
Osun Defender reports that a retention fund is a form of security provided for any construction contract as limited security for the due performance of the contractor’s obligations under the contract.
Accordingly, upon completion of the project(s), the contractor applies through the procurement department of the ministry which then writes to the permanent secretary for consideration and approval to the Ministry of Finance for payment.
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.
The ministry then cited a lack of funds.
However, in the latest move, the OAGF in a memo said, “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.”
