The Federal Government has taken a significant step toward resolving Nigeria’s long-standing contractor debt crisis by earmarking N1.7 trillion in the 2026 Appropriation Bill to settle outstanding payments owed to contractors for capital projects executed in 2024.
The move signals renewed efforts by the administration to stabilise the construction and infrastructure value chain after years of delayed payments, protests, and mounting financial strain on indigenous contractors.
A detailed review of the proposed 2026 budget shows that the allocation is captured under a specific line item titled “Provision for 2024 Outstanding Contractor’s Liabilities.”
The inclusion formally acknowledges the backlog of unpaid obligations that has disrupted project execution, weakened contractor balance sheets, and strained relationships between the government and the private sector.
Why Contractor Debts Became a Flashpoint
Nigeria’s unpaid contractor obligations have evolved into a major fiscal and governance concern over the past two years.
Indigenous contractors, many of whom relied on bank loans to execute federal projects, have repeatedly warned that delayed payments were pushing businesses toward insolvency, triggering layoffs, and increasing non-performing loans within the banking sector.
In 2025, several contractor groups, including members of the All Indigenous Contractors Association of Nigeria, staged protests in Abuja, claiming that unpaid federal contracts exceeded N2 trillion.
They argued that repeated assurances from government officials had failed to translate into actual cash releases, leaving completed and in some cases commissioned projects unpaid.
The pressure intensified as contractors struggled to meet loan repayment obligations amid rising interest rates and tightening credit conditions.
Many warned that continued delays would discourage private-sector participation in public infrastructure delivery.
FG earmarks N1.7tn in 2026 budget for unpaid contractors
The decision to set aside N1.7tn in the 2026 budget for unpaid contractors appears to be a direct response to these mounting pressures.
According to budget documents, the allocation is designed to clear verified liabilities linked to projects completed in 2024 but not fully paid due to revenue shortfalls and delayed capital releases.
Beyond the main provision, the Federal Government also included an additional N100 billion under a separate line item described as “Payment of Local Contractors’ Debts/Other Liabilities.”
This supplementary allocation is expected to address legacy claims, smaller contractual obligations, and liabilities that may not have been fully captured in earlier audits.
Together, the two provisions bring the total planned allocation for contractor-related liabilities in 2026 to N1.8 trillion, forming part of the broader N23.2 trillion capital expenditure framework proposed for the fiscal year.
Earlier Promises and Partial Payments
The inclusion of the contractor liability provision follows earlier assurances by the Minister of Works, David Umahi, that verified arrears would be cleared before the end of 2025.
While the government confirmed that some payments were made, contractors insist that the disbursements were partial and fell short of the total verified claims.
Finance and Coordinating Minister of the Economy, Wale Edun, had earlier stated that the Federal Government paid over N2 trillion in outstanding capital obligations tied to the 2024 fiscal year.
Speaking at a ministerial briefing in Abuja, Edun said the payments were part of efforts to restore confidence and reposition Nigeria as an attractive investment destination.
However, contractor associations dispute the claim that all arrears were cleared, maintaining that many certified payments remained unpaid despite the issuance of payment warrants.
Contractors Push Back Against Delays
The National Secretary of the All Indigenous Contractors Association of Nigeria, Babatunde Seun-Oyeniyi, has repeatedly accused government officials of attempting to defer payments into future fiscal cycles.
According to him, contractors were shown payment warrants without corresponding cash releases, deepening mistrust.
He noted that members of the association alone were owed more than N500 billion for completed projects, adding that repeated meetings with officials of the Ministry of Finance yielded no tangible results.
The renewed protests in late 2025 eventually drew the attention of President Bola Tinubu, who reportedly expressed strong dissatisfaction with the situation.
Presidential Intervention and Verification Process
In December 2025, the Presidency confirmed that President Tinubu ordered the creation of a high-level committee to resolve the contractor payment backlog.
Presidential spokesman Bayo Onanuga disclosed that the President was “deeply unhappy” after learning that nearly 2,000 contractors were affected nationwide.
The committee was tasked with verifying claims, eliminating inflated or duplicated invoices, and proposing a streamlined payment framework.
The outcome of this verification exercise is widely expected to guide how the N1.7tn earmarked in the 2026 budget for unpaid contractors will be disbursed, likely in tranches tied to certified claims.
Fiscal Context of the 2026 Budget
The proposed N58.47 trillion 2026 national budget reflects the government’s attempt to balance infrastructure expansion with fiscal consolidation.
Of the total sum, N23.2tn is allocated to capital expenditure, N15.9tn to debt servicing, N15.25tn to recurrent expenditure, and N4.09tn to statutory transfers.
Analysts note that while the contractor payment provision will place additional pressure on public finances, clearing the backlog could unlock stalled projects, restore contractor confidence, and reduce systemic risks in the construction and banking sectors.
Implications for Infrastructure Delivery
If effectively implemented, the move to settle outstanding contractor liabilities could mark a turning point for Nigeria’s infrastructure drive.
Timely payments are expected to improve project completion rates, attract new bidders for public contracts, and reduce the cost overruns associated with delayed execution.
For many contractors, the 2026 budget provision represents more than just a fiscal line item—it is a test of the government’s commitment to honoring contractual obligations and restoring trust in public procurement processes.
As the National Assembly begins scrutiny of the budget, attention will remain firmly fixed on whether the N1.7tn allocation for unpaid contractors survives legislative review and, more importantly, whether it translates into actual cash-backed payments in 2026.
About The Author
