Disturbed by the non-release of retention funds by Ministries, Departments and Agencies of Government, MDAs in the last ten years, the House of Representatives on Tuesday resolved to dig into the matter.
In a motion promoted by Hon. Abubbakar Makki Yalleman, the House: noted that in the last ten years, Ministries, Departments and Agencies have held unto retention funds running into billions of naira meant for contractors despite issuing Certificates of Completion, taken over the projects and the expiration of the mandatory defect liability period as prescribed by law.
It observed that the practice is inimical to the growth of Small and Medium Scale Enterprises (SMEs) as it denies contractors the needed capital to stay afloat while part of those funds formed part of the N1.2 trillion the Fiscal Responsibility Commission accused about 122 MDAs of failure to remit in 2020.
The members also stated hat the global best practice in Retention Fund is to release half of the fund after the issuance of the certificate of completion, while the balance is released upon the attainment of the defect liability period which is usually twelve (12) months after completion and handover of the projects.
Also observes that with the harsh economic climate in the country, low–profit margins, runaway inflation, high lending rates and difficulty in accessing funds by MSMEs, the 5%–10% retention fees oftentimes constitute a significant portion of the contractors’ profit, especially as payment schedule is skewed in favour of the MDAs;
To this end the House resolved to setp an Ad-hoc Committee to investigate the failure of Ministries, Departments and Agencies (MDAs) to release Retention funds and report back within six (6) weeks for further legislative action.
When it was put to a voice vote by the presiding officer, Rep Femi Gbajabiamila, the House unanimously passed the motion.