Investigation into the Causes of Contractors’ Business Failure in Nigeria
I.Y.Mohammed
Department of Building Technology
Faculty of Environmental Technology
Abubakar Tafawa Balewa University, Bauchi
ABSTRACT
The construction industry has unique characteristics that sharply distinguish it from other sectors of the economy. It is fragmented, very sensitive to the economic cycles and political environment, and has a significantly high rate of business failure. Business failure, collapse and bankruptcy are common terms in the industry due to the many risks inherent in how the industry operates. Throughout the world, the relative ease of entry gives rise to a large number of contracting firms competing aggressively in the market exposing many of them to business failure, Nigeria is no exception. The objectives of this paper are to report on a research study which aims at discovering the causes of contractors’ business failure in Nigeria, and examining their severity from the contractors’ viewpoint. The results shows that the main causes of business failure are delay in collecting debt from clients, heavy dependence on bank loans and payment of high interest on these loans, lack of capital, absence or weak industry regulations, low profit margin due to high competition, awarding contracts by client to the lowest bidder, and lack of experience in contract management. Based on these findings, recommendations to the Nigerian Government and local contractors are presented in this paper.
Keywords: Business failures, Nigeria, Bankruptcy, Contractors, Construction industry
