The Federal Government, through the Office of the Accountant General of the Federation (OAGF), has mandated all Ministries, Departments, and Agencies (MDAs) to remit five percent retention fees deducted from contractors’ payments to the Central Bank of Nigeria.
This directive, signed by the Accountant General of the Federation, OluwaToyin Madein, aims to address complaints over non-payment of retention fees by MDAs upon completion of projects by contractors.
A memo dated June 27, 2024, addressed to the Chief of Staff to the President, Femi Gbajabiamila, and other key officials, outlines the new guidelines. The memo, tagged OAGF/CAD/026/Vol.V/896, notes that the retention fund is a form of security provided for any construction contract to ensure the contractor’s obligations are fulfilled.
At the completion of a project, the contractor receives a percentage of the total fund, and after the final certificate is issued, the remaining balance is paid.
The retention fund, which constitutes a 5% deduction from the total contract sum, is kept in a separate account by the ministry and paid to the contractor after six months of the completion, verification, and certification of the project.
In 2022, contractors who 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, citing a lack of funds.
The OAGF memo states that the five percent retention fees deducted from contractors’ payments shall henceforth be remitted to the retention fees account domiciled at the Central Bank of Nigeria.
MDAs must prepare and attach a schedule of executed contracts as of December 31, using the attached format, which must be certified by the Accounting Officer and the Director/Head of Finance and Accounts, and forwarded to the Sub-Treasury of the Federation.
