FG to Settle 35% of ₦150bn Debt Owed to Indigenous Contractors Upfront - AICAN
Nigeria Targets ₦52.5bn Upfront Payment to Indigenous Contractors Amid Debt Resolution Efforts
The Federal Government has approved the upfront payment of 35% of the estimated ₦150 billion owed to indigenous contractors, according to the Association of Indigenous Contractors of Nigeria (AICAN). The decision aims to ease liquidity constraints within the construction sector and accelerate stalled infrastructure projects across the country.
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Government Moves to Address Contractor Arrears
The Federal Government’s commitment to settle part of the outstanding obligations marks a significant intervention in Nigeria’s infrastructure financing landscape. AICAN disclosed that the upfront payment will cover approximately ₦52.5 billion, representing 35% of the total debt owed to local contractors.
This move reflects a broader fiscal strategy to restore confidence among indigenous contractors, many of whom have faced prolonged payment delays. These delays have constrained working capital, disrupted project timelines, and increased borrowing costs for firms executing government contracts.
Impact on Infrastructure Delivery
Industry stakeholders expect the partial settlement to unlock liquidity within the construction ecosystem. Contractors rely heavily on timely payments to fund ongoing projects, procure materials, and service debt obligations.
By releasing a portion of the owed funds, the government intends to:
Reactivate stalled or slow-moving infrastructure projects
Improve contractors’ cash flow positions
Reduce project cost overruns linked to delays
Strengthen participation of local firms in public procurement
The construction sector plays a critical role in Nigeria’s economic development, contributing to employment generation and capital formation. Payment backlogs have historically undermined its efficiency and growth potential.
Fiscal Considerations and Policy Context
The payment plan aligns with ongoing efforts by the Federal Government to manage legacy debts while maintaining fiscal discipline. Nigeria continues to face revenue constraints, making full and immediate settlement of obligations challenging.
Adopting a phased payment structure allows the government to balance competing priorities, including debt servicing, recurrent expenditure, and capital investment. However, analysts note that sustained progress will depend on improved revenue mobilisation and budget execution efficiency.
Stakeholder Reactions
AICAN has welcomed the development, describing it as a positive step toward resolving long-standing issues affecting indigenous contractors. The association emphasised that consistent and predictable payment mechanisms remain essential for sector stability.
Market observers also view the move as a signal of the government’s commitment to supporting local contractors, which could enhance investor confidence in Nigeria’s infrastructure value chain.
Outlook
The upfront payment of 35% of the ₦150 billion debt represents a targeted intervention to stabilise Nigeria’s construction sector. While the measure provides immediate relief, stakeholders will monitor the government’s ability to complete the remaining payments and prevent future arrears accumulation.
Sustained reforms in public finance management and contract administration will be critical to ensuring long-term efficiency in infrastructure delivery and strengthening the role of indigenous contractors in national development.
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