FG moves to end contract awards without funds

August 13, 2025 by Our Reporter

…to clear payments for 2024 Contracts

…set to Amend PIA to Get more Funds

The Federal Government has announced a major policy shift to ensure that all contracts awarded by Ministries, Departments, and Agencies (MDAs) are backed by available funds before any legal commitments are made.

Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, disclosed this in Abuja on Wednesday during the Stakeholders’ Engagement on the Implementation of the 2025 Capital Budget and Related Issues.

According to Edun, the issuance of Warrants and Authority to Incur Expenditure (AIEs) will now precede any contract award or financial obligation by MDAs. “This is to serve as evidence of funds available for the award of contracts or processing of payments for ongoing and completed contracts,” he said. 

“Prior to legal commitment, we spend what we have earned. For the avoidance of doubt, we are to ensure that no letter of award is issued, contract signed, or any financial obligation entered into unless corresponding Warrants and AIEs covering the full or committed portion have been duly released.”

The minister stressed that the government’s aim was to restore fiscal discipline and avoid the distortions that previously undermined public spending. “The past is the past. We are where we are. Government will meet its obligations. Nonetheless, we are here to make things better, to improve as we go forward,” he stated.

Edun revealed that the administration had removed distortions costing the economy about 5 per cent of GDP, leading to increased revenue inflows. “The funds are flowing, and we have seen from the figures that they are flowing into the federation account as well as other avenues of government revenue. The President has done his part. The critical thing is that the extra resources are channelled diligently, skilfully, and with full responsibility into areas that drive the economy,” he said.

He added that the policy focus is on investment rather than consumption. “They are channelled into investment in equipment and facilities that increase productivity, drive the economy, create jobs, and lift people out of poverty by the millions. That’s the aim and policy of Mr. President and his entire administration,” Edun said.

While noting that the economy is currently growing at about 3.5 per cent—above the population growth rate—Edun stated that the government’s target is to achieve at least 7 per cent growth annually to drive rapid, sustained, and inclusive development.

Director-General of the Budget Office, Dr. Tanimu Yakubu, outlined the revenue challenges that necessitated the new measures. He said significant revenue shortfalls in the first two quarters of the year. “In both the first and second quarters, we had significant revenue underperformance” he said.

These shortfalls he said were due to provisions of the Petroleum Industry Act (PIA) 2022, which allocates 30 per cent of gross oil revenue to the Nigerian National Petroleum Company Limited (NNPC) as management fees and another 30 per cent of gross oil and gas profit to the Frontier Exploration Fund.

“I have initiated efforts through the National Assembly to amend this Act so that we could have more revenue without necessarily finding new sources of inflows. On account of that law, we lost a sizable part of the revenue that used to fund 80 per cent of the nation’s public expenditure,” Yakubu explained.

Another reason for the underperformance of the 2025 budget he said is that at the start of 2025, the government was already using current inflows to service the 2024 budget. 

In addition, “Oil revenue was further hit by developments in the international oil market that we do not control. The price dropped and we were unable to realise the targeted output. Therefore, it became necessary to prioritise expenditure,” he said.

Accountant-General of the Federation, Mr. Shamseldeen Ogunjimi, stressed that timely submission and prioritisation of budget implementation plans would enable the government to match spending with seasonal and project requirements. “We want to restore confidence in the system so that when you hold a government contract letter, banks and others will be willing to support you,” he said.

Read Also: FG sets September deadline for MDAs to conclude 2024 project procurement

Ogunjimi clarified that contracts already captured on the Government Integrated Financial Management Information System (GIFMIS) platform and backed by cash warrants are considered government liabilities and will be funded accordingly. “For new contracts, they must be aligned with this policy before they are recognised. By the time we open the platform, any new entry is considered a new contract and must comply with this process,” he added.

Director of Funds, Mr. Steve Ehikhamenor, urged MDAs to follow the circular issued by the Budget Office for categorising and prioritising projects. “We are not here for a joke. We are here to resolve issues. If you follow the guidelines and prioritise according to the economic plan, we will be able to match scarce resources to the most critical projects,” he said.

The meeting was attended by top officials from the Ministry of Finance, the Budget Office, and other key fiscal agencies, with participants agreeing to align contract awards and spending with actual revenue inflows to ensure more efficient capital budget implementation.