FOCI: Construction Industry Faces Collapse over Funding, Payment Crises

The Federation of Construction Industry (FOCI) has issued a warning that Nigeria's construction industry is facing a severe crisis due to insufficient and unpredictable funding, delayed payments, and rising operating costs. During its 70th Annual General Meeting, FOCI's President and Chairman of Council, Chief Vincent Barrah, read a communiqué that highlighted the association's concerns.

The industry has seen a significant slowdown in construction activities, attributed to the mismatch between annual budgetary allocations and cash releases for infrastructure projects. Many projects are awarded without adequate multi-year funding, leading to delayed payments, accumulation of debts, reduced construction activities, and in some cases, project suspension or abandonment.

Contractors are experiencing low capacity due to non-payment, with some already working at minimal levels. FOCI also raised concerns about terminated contracts, particularly those with the Ministry of Works, where inadequate funding has led to their suspension. The funding crisis has impacted employment, with around 1,000 senior staff and 40,000 junior workers losing their jobs.

This has broader repercussions for families, businesses, and the economy. FOCI emphasized the need for greater collaboration among stakeholders, including the Bureau of Public Procurement, Council for the Regulation of Engineering in Nigeria, Nigerian Society of Engineers, the Ministry of Works, and the Federal Ministry of Justice, to review or replace existing contract conditions.

The association also called for a more responsive approach to contract pricing, considering factors such as inflation, foreign exchange rates, and construction input costs. Delays in the certification and payment of completed works are another major constraint on contractors' cash flow, forcing them to finance projects while waiting for government payments.

High financing costs due to elevated interest rates and limited access to affordable local infrastructure financing are further exacerbating the situation. Despite these challenges, FOCI sees significant long-term opportunities for the construction sector in Nigeria's infrastructure deficit. However, urgent intervention from the government and other stakeholders is necessary to address the challenges before they further weaken construction activities, employment, and infrastructure delivery.