Dealing with a Contractor’s Insolvency in Construction Contracts – A Nigerian Law Perspective

Abstract

Nigeria’s construction sector is a vital economic growth driver. The sector provides physical infrastructure in relation to power, roads, rail, bridges, real estate, industries which drive industrialization and economic growth. The Nigerian Institute of Building claims Nigeria’s construction industry is worth around US $69 billion and employs 5% of Nigeria’s 180 million people. In its last released Labour Productivity Report (Q3 of 2016), the Nigerian Bureau of Statistics, estimated that Nigeria’s workforce stood at 80,669,196. The construction sector’s workforce thus constitutes 11.65% of Nigeria’s total workforce. Nigeria currently has an infrastructure deficit of $300 billion and the 30-year Integrated Infrastructure Master Plan, launched in 2014, projects that Nigeria will require roughly $3 trillion for infrastructure development over 30 years to close the infrastructure gap. The above highlights the importance of a stable construction sector and timely project delivery. A contractor’s insolvency may result to allocation of insufficient resources, compromise in quality of work, increase in defects, substantial time and cost overruns, default in related contracts and subcontracts and non-completion of the project. A contractor’s insolvency will adversely affect a range of parties, including its employer. This article examines the remedies and buffers which an employer may employ to mitigate losses and minimize disruptions resulting from a contractor’s insolvency.