An Investigation Of Late And Non Payment Issues In The Nigerian Construction Industry-Contractors’ Perspective In Akwa Ibom State

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An Investigation Of Late And Non Payment Issues In The Nigerian Construction Industry-Contractors’ Perspective In Akwa Ibom State


Chapter One


Introduction

1.1 Background Of Study

Nigeria’s building industry is one of the country’s most important. It accounts for around 2% of the country’s gross domestic product (GDP). It has a workforce of about two million people and uses a variety of experts for support, including architects, engineers, constructors, and surveyors. Industry creates the necessary structures and facilities for socioeconomic development, contributing to total economic growth. The construction sector is usually a substantial component of the national annual development plan. As a result, the development of the sector is a vital success factor in the overall development of the national economy. The classic design-bid-build technique of contracting is the most prevalent project procurement method utilized in commercial construction in Nigeria. The majority of contracts are awarded to principal contractors, who then engage in agreements with subcontractors, suppliers, and, eventually, skilled artisans and workers hired by these companies. However, it is typical to find that the contractor’s problem is due to flaws in the construction industry’s payment system. Many in the industry witness and often experience the consequences of payment defaults, and they continue to complain about them. Nonetheless, the problem was not a serious concern during the 1970s oil boom, when work was plentiful and many contractors, including subcontractors, were willing to accept late payment. The problem was exacerbated by the industry’s deepening impact of a dismal market and diminishing construction demand. The challenges have not been prevented by general legislation or current contractual arrangements for project procurement. As a result, new procedures are urgently needed to address the cash flow issues that contractors in the Nigerian construction industry face.


1.2 Statement Of Problem

The construction industry’s lifeblood is believed to be payment. However, there is still a persistent problem with late and non-payment, according to Lin Chon Fong (2005). The Nigerian Federation of Building and Civil Engineering Contractors has been lamenting this issue, which has been widely highlighted in the media. This is a huge concern because the sums paid for work and services delivered in the business are significant, frequently in the billions of naira range. The industry functions and will continue to function as long as the work and services are suitably compensated. The practice of making timely and effective payments is a critical component of project success (CIOB 2004). According to a survey of payment performance, the construction sector has established a late and non-payment culture, which, in certain situations, leads to disputes, according to John Stone (1999). Because payment is postponed pending the settlement of the disagreement, this frequently causes serious cash flow problems, especially for contractors. Arbitration and litigation are currently the most popular dispute resolution processes in the construction business. In practice, these systems leave a lot to be desired due to their numerous flaws and shortcomings. The issue is deteriorating because:

  1. Unpaid contractors in Nigeria have only limited security of payment and remedies pending dispute settlement.
  2. There is no common law right for the contractor to suspend work for non-payment; otherwise, the court may declare him guilty of contract repudiation.
  3. Even though the standard form of contract (JCT 80 Nigerian edition) contains clear provisions for termination of a job for nonpayment, most contractors are reluctant to go down this road in reality in order to maintain commercial goodwill with their employers.

This is the current predicament of an unpaid Nigerian contractor, whose cash flow and profitability are threatened.


1.3 Objective Of Study

The following are the objectives of this study;

  1. To identify the causes of late and non-payment of construction projects.
  2. To establish the common reactions by contractors in managing the problems
  3. To examine the effects on the contractors and ways to mitigate the problems

1.4 Research Question

  1. What are the causes of late and non- payment in Nigeria construction industry?
  2. What are the common reactions of contractors when faced with a late and non-payment situation?
  3. Does late and non-payment of contractors have any negative effect on their job performances?

1.5 Significance Of Study

First and foremost, the goal is to raise awareness of both employers’ and contractors’ responsibilities regarding payment concerns. It will give contractors a better grasp of their payment rights and their legal position if payment is delayed or not made. In general, the study’s conclusions may aid industry stakeholders in addressing the issues of late and non-payment in a holistic manner for the benefit of all. It may be particularly advantageous to the introduction of legislation known as a “building payment Act,” which is already in place in many developed countries.


1.6 Scope Of Study

This study focuses on investigating of late and non payment issues in the Nigerian construction industry-contractors perspective, with the specific aim of identifying the causes of late and non-payment of construction projects, establishing the common reactions by contractors in managing the problems and examining the effects on the contractors and ways to mitigate the problems. The study will therefore be delimited to Ideal contractors limited, Akwa ibom state.


1.7 Limitation Of Study

Finance, inadequate materials and time constraint were the challenges the researchers encountered during the course of the study.


1.8 Definition Of Terms

Contractors:

A contractor is any individual or organization that is hired to perform work for another individual or organization on a contract basis.

Construction Industry:

The branch of manufacture and trade based on the building, maintaining, and repairing structures.

Non-Payment:

Non-payment is a failure to pay a sum of money that you owe


Chapter Two


Review Of Literature

Introduction

Our focus in this chapter is to critically examine relevant literature that would assist in explaining the research problem and furthermore recognize the efforts of scholars who had previously contributed immensely to similar research. The chapter intends to deepen the understanding of the study and close the perceived gaps.


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