Contractors in for ‘hard times’ over crude crunch

The revenue decline in the country as a result of the decline in price of crude oil may affect the ability of the federal government and states to pay contractors.

Muda Yusuf (pictured), director-general, Lagos Chamber of Commerce and Industry (LCCI), gave this indication in a telephone interview with TheCable on Sunday.

According to Yusuf, the private sector is likely going to have some challenges the amount of contracts they get from governments would be reduced.

“Some of them being owed, there is a risk that the chance of them been paid will be reduced. Even in the best of times government doesn’t pay contractors on time. So now that the situation is what it is, that kind of situation is likely to get worse,” he said.

He stated that with the decline in oil price, there will definitely be a sharp drop in government revenue, which means government may face challenges meeting its obligations in terms of paying salaries, executing some of its projects, particularly capital projects.

He added: “Now there are some states that have not paid salaries for two months as a result of this. It is likely to see situations where some projects will have to be abandoned and I mean capital projects.

“We are likely to see a reduction in investment in infrastructure, because already we are running a budget that is almost 50 per cent recurrent.

“Now, with the shortfall in revenue, you will see the recurrent expenditure will be taking up to 90 per cent or more and what would be left for capital project would be insignificant.”

Yusuf pointed out that if there is a reduced investment in infrastructure; the private sector will have some challenges as a lot of Nigerians had been craving for better infrastructure and better investment environment.

He, however, asked Nigerians to look inwards and patronise locally manufactured goods and services.

“I think it will make a lot of sense for us to substitute whatever we were importing before for locally made goods and services.

“Where it is possible, we get local substitutes either in the government side or private sector side. We need to be more creative in that area. If you were importing something before, if there are local experts that can do the job, give them to the local experts.

“If you were importing raw materials before and if there are local substitutes, we have to use the local substitute. If we are going abroad for medical treatment before, we can identify some local hospitals.

“This is the time to do that locally. If you are thinking of sending your children abroad for school which has become more difficult now, this is the time to look inwards.”