My Observatory:How Should The Federal Government Manage Procurement So Suppliers Are Not Owed?
By Sola Fanawopo
The Nigerian Senate on Wednesday commenced the screening of Taiwo Oyedele, the immediate past Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, following his nomination as Minister of State for Finance by President Bola Ahmed Tinubu.
The exercise came barely 24 hours after the President wrote to the Senate requesting Oyedele’s confirmation to join the Federal Executive Council, replacing Doris Uzoka-Anite.
I had the opportunity to watch part of the screening, during which several senators asked probing questions. Many clearly believe that Oyedele possesses the intellectual capacity and policy depth to help resolve some of Nigeria’s most difficult fiscal challenges.
For me, however, one question stood out above the rest. A senator asked a very practical but profoundly important question:
“ How should the Federal Government manage its procurement system so that suppliers are not owed?”
That single question goes to the heart of one of the most damaging inefficiencies in Nigeria’s public finance system.
In his response, the minister-designate acknowledged the seriousness of the problem and promised that the issue would be addressed as quickly as possible. He rightly noted that the Federal Government pays dearly for delays in settling suppliers. Contractors and vendors, aware of the uncertainty surrounding government payments, often inflate their prices to cover the cost of possible delays. In effect, Nigeria pays a hidden “risk premium” on public procurement.This problem is not unique to Nigeria, but other countries have built systems that prevent it from becoming chronic.
Nigeria may need to look closely at how procurement and payment systems are structured in the United States. The U.S. federal government operates one of the most structured and regulated procurement systems in the world, designed to ensure both accountability and prompt payment to suppliers.
The system is governed primarily by the Federal Acquisition Regulation, which establishes the rules guiding how government agencies procure goods and services.
Ensuring Government Payment Obligations
In the U.S., the government’s obligation to suppliers begins with a clearly defined contractual framework. Every procurement is backed by a formal contract or purchase order that legally commits the government to payment once goods or services are delivered according to agreed terms.The system is further strengthened by the Prompt Payment Act, which mandates that federal agencies must pay vendors promptly—usually within 30 days of receiving a proper invoice. If payment is delayed beyond the stipulated period, the government must pay interest penalties to the supplier.This creates a strong institutional incentive for agencies to process payments on time.
Proper Invoicing and Digital Processing
Payments are triggered only when vendors submit a proper invoice, containing specific details such as contract numbers, supplier registration information, and clear descriptions of delivered goods or services.
The process is further streamlined through electronic procurement and payment platforms. For example, U.S. agencies use systems like the Procurement Integrated Enterprise Environment, which digitizes the entire “procure-to-pay” cycle.
These systems reduce human errors, prevent duplication, and create transparent audit trails.Before payment is released, a designated contracting officer verifies that the goods or services delivered meet the contractual specifications. Only after this confirmation is payment authorized.
Payment Structures Based on Contract Type
The system also recognizes that different projects require different payment structures.Under fixed-price contracts, suppliers are paid after delivery and acceptance of goods or services.For long-term projects, particularly construction, the government uses progress payments, allowing contractors to receive partial payments as work advances. This helps maintain cash flow and prevents contractors from financing government projects from their own pockets.Construction contracts also allow payments for materials delivered to the project site, ensuring that contractors are not financially strangled before completion.
Safeguards and Accountability
The U.S. procurement system also embeds several layers of accountability.All suppliers must be registered in the System for Award Management before they can receive government payments.
Independent audit institutions such as the Defense Contract Audit Agency review contractor records to ensure compliance, detect irregularities, and prevent fraud.Additionally, government agencies must verify that all work meets the required quality standards before approving final payment.
When Problems Occur
Even within this robust system, delays can occur if invoices contain errors, if banking information is incorrect, or if disputes arise regarding performance. However, the legal requirement to pay interest on late payments discourages agencies from allowing such delays to become routine.
Lessons for Nigeria
Nigeria’s procurement challenge is therefore not merely about budgeting; it is about building a disciplined procure-to-pay system that links contract approval, funding availability, project verification, and payment processing into one transparent framework.The Federal Government must ensure that no contract is awarded without a guaranteed funding source, payments are processed digitally, invoices are standardized, and penalties exist for delayed payments.
If Taiwo Oyedele can design and implement a procurement system that guarantees prompt payment to suppliers, he would not only reduce corruption and contract inflation but also restore confidence in government contracting.And if he succeeds in doing that, he may indeed have written his name in diamond in the annals of Nigeria’s public finance reforms.
©Sola Fanawopo
