AN INVESTIGATION OF LATE AND NON PAYMENT ISSUES IN THE NIGERIAN CONSTRUCTION INDUSTRY-CONTRACTORS’ PERSPECTIVE IN AKWA IBOM STATE

AN INVESTIGATION OF LATE AND NON PAYMENT ISSUES IN THE NIGERIAN CONSTRUCTION INDUSTRY-CONTRACTORS’ PERSPECTIVE IN AKWA IBOM STATE

CHAPTER ONE

INTRODUCTION

1.1 Study Background

One of Nigeria’s most significant industries is the construction sector. A little less than 2% of the nation’s GDP is made up of it. It employs about two million people and consults with a range of specialists, including surveyors, engineers, builders, and architects. Industry builds the facilities and structures required for socioeconomic development, promoting overall economic expansion. The yearly national development plan often includes a sizeable portion for the building industry. Consequently, the growth of the sector is crucial to the overall success of the development of the national economy. The most common project procurement approach used in commercial construction in Nigeria is the traditional design-bid-build procedure. Most contracts are given to principle contractors, who subsequently enter into agreements with suppliers, subcontractors, and eventually the skilled artisans and laborers that these businesses have employed. However, it is common to discover that the contractor’s issue is brought on by problems with the payment system used in the construction sector. Many people in the sector see and frequently suffer the results of payment defaults, and they nevertheless whine about them. However, during the oil boom of the 1970s, when work was plentiful and many contractors, including subcontractors, were willing to accept late payment, the issue was not a serious one. The issue was made worse by the sector’s worsening effects of a poor market and declining construction demand. Neither general law nor the current project procurement contracts have been able to stop the challenges. New procedures are therefore urgently required to address the cash flow problems that Nigerian construction industry contractors are currently experiencing.

Statement of the Problem 1.2

Payment is thought to be the lifeblood of the construction sector. According to Lin Chon Fong (2005), there is still a recurrent issue with late and non-payment. This problem, which has received a lot of attention in the media, has been lamented by the Nigerian Federation of Building and Civil Engineering Contractors. The amount of money paid for the work and services provided in the firm is enormous, frequently in the billions of naira range, thus this is a major reason for concern. As long as the effort and services are properly compensated, the industry will continue to operate.The successful completion of a project depends critically on the practice of timely and efficient payments (CIOB 2004). According to a payment performance survey, the construction industry has developed a culture of late and non-payment, which, in some circumstances, results in disputes, according to John Stone (1999). Payment is delayed while the dispute is being resolved, which usually results in severe cash flow issues, especially for contractors. In the construction industry, arbitration and litigation are now the two most common conflict resolution methods. Due to their various errors and shortfalls, these systems perform poorly in practice. The problem is getting worse because:

1. In Nigeria, unpaid contractors have few options for redress while a dispute is being resolved.

2. The contractor does not have a common law right to halt work due to non-payment; if he did, the court might find him in breach of the contract.

3. Despite the clear provisions for termination of a job for nonpayment in the standard form of contract (JCT 80 Nigerian edition), most contractors are reluctant to take this route in practice in order to preserve their employers’ business relationships.

An unpaid Nigerian contractor is currently in this situation, endangering both his cash flow and profitability.

1.3 The study’s goal

The goals of this study are as follows:

1. To determine the reasons why construction projects are paid late or not at all.

2. To identify the typical responses used by contractors while handling issues 

3. Investigate the impacts on the contractors and potential solutions

1.4 Research Problem

1. What are the reasons for late and unpaid invoices in the Nigerian construction sector?

2. How do contractors often respond to situations involving late and non-payment?

3. Does a contractor’s performance suffer if they are paid late or not at all?

1.5 Importance Of The Study

The main objective is to increase knowledge of the obligations of both employers and contractors with relation to payment issues. Contractors will have a clearer understanding of their payment rights and legal position in the event that payment is late or not made. The study’s findings could generally help industry stakeholders manage the problems of late and non-payment holistically for the good of all. The establishment of the “building payment Act,” which is currently law in many industrialized nations, may benefit especially from it.