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The short answer
Milestone billing means agreeing in the contract that the job is paid in stages, each tied to a defined, checkable piece of work. A contractor in Nigeria usually takes a mobilisation payment before starting, invoices each milestone when it is certified complete, and stops work if a stage is not paid. Withholding tax at 2% (building construction) or 5% (other construction) is commonly deducted from each payment.
Builders, renovation contractors, fit-out firms and installers in Nigeria often end up financing their clients. They buy cement, rods, tiles or cable with their own money, pay labour weekly, and wait for a lump sum at the end that may arrive late or short. Milestone billing reduces that exposure by matching payments to progress.
Designing the milestones
A good milestone is defined by an outcome that both sides can see, not by a date. "Roof completed and covered" can be checked; "end of month two" cannot. For each stage, the contract should state:
- What work makes up the stage, with reference to drawings or a bill of quantities.
- The amount or percentage of the contract sum payable on completion.
- Who certifies completion (the client, an architect, a quantity surveyor or a consultant).
- How long the client has to certify and then to pay.
- What happens if payment is late: suspension of work, interest, or both.
A sample schedule
Example only. A two-bedroom bungalow with a contract sum of ₦30,000,000:
| Stage | Share | Amount |
|---|---|---|
| Mobilisation (before site work) | 20% | ₦6,000,000 |
| Foundation and substructure complete | 15% | ₦4,500,000 |
| Blockwork to lintel, lintel cast | 20% | ₦6,000,000 |
| Roofing complete | 20% | ₦6,000,000 |
| Finishes, plumbing and electrical complete | 20% | ₦6,000,000 |
| Handover and defects period ends | 5% | ₦1,500,000 |
| Total | 100% | ₦30,000,000 |
Check: 20 + 15 + 20 + 20 + 20 + 5 = 100%, and the amounts add to ₦30,000,000. The front-loaded mobilisation payment covers early material purchases so the contractor is not out of pocket in the first stage. The right deposit depends on the job; see our planned guide to how much deposit to take.
Certifying a stage
Payment disputes usually turn on whether a stage was finished. Build certification into the process:
- When a stage is complete, notify the client and certifier in writing, with photos and the date.
- Invite inspection within a fixed number of days set in the contract.
- Get a signed completion certificate or written confirmation. If the certifier lists defects, fix them and request sign-off again.
- Issue the milestone invoice quoting the certificate, the stage and the contract reference.
- Do not start the next stage's major purchases until payment arrives, unless the contract says otherwise.
Keep a site diary, delivery notes for materials and dated photos. They are the evidence if the client later claims work was incomplete; see proof of delivery.
Tax on each milestone
Corporate and government clients deduct withholding tax from each payment. Under the Withholding Tax Regulations 2024, as summarised by Udo Udoma & Belo-Osagie on Mondaq (July 2024), the resident rate is 2% for construction of roads, buildings, power plants and bridges and 5% for other construction and related activities. The payer should give you a receipt for each deduction. Government clients pay through TMRAS, which, as Techeconomy reported in March 2025, will not release a payment without its tax components; see getting paid by an MDA.
If you are VAT registered, charge 7.5% VAT on each milestone invoice; the rate was retained under the Nigeria Tax Act 2025, per Forvis Mazars (March 2026).
Worked example
Example only. The roofing milestone above (₦6,000,000) is paid by a company. With 2% WHT for building construction (₦120,000), the contractor receives ₦5,880,000 plus any VAT charged, and a WHT receipt for ₦120,000.
Retention and the final payment
Many building contracts hold back a final slice, often called retention, until a defects period has passed. In the sample schedule that is the last 5%. If you accept retention, the contract should state how long it is held, what defects you must fix, and that it is released automatically when the period ends without a valid defect notice. Diarise the release date; retention is easy for a client to forget.
Variations
Clients often ask for extra work during a job. Agree each variation in writing before doing it, with its price and how it will be paid: as an addition to the next milestone, or as its own invoice. Unrecorded variations are a common source of end-of-job disputes, because the client remembers the original price and the contractor remembers the extra work.
What to check first
- Is every milestone defined by checkable work, with a named certifier?
- Does the contract give you the right to suspend work if a certified stage is not paid?
- Is there an agreed interest clause for late payment? See charging interest on a late invoice.
- Who bears price rises in materials during the job? Agree whether prices are fixed or can be reviewed.
- Have you priced in WHT so the net payments cover your costs?
Where Pryme fits
A Pryme Business Account supports invoicing for each stage and bulk payouts for paying site workers. The Finance agent prepares work for a person to approve above a set ceiling.
Questions people ask
How do contractors get paid in stages in Nigeria?
The contract splits the job into milestones, each with a share of the contract sum. The contractor invoices each stage when it is certified complete, usually after a mobilisation payment before work starts.
How much withholding tax is deducted from a building contract payment?
Under the 2024 WHT regulations summary, the resident rate is 2% for construction of buildings, roads, bridges and power plants and 5% for other construction and related work.
What is retention in a building contract?
A final portion of the contract sum held back until a defects period ends. The contract should state how long it is held and when it is released.
What if the client refuses to certify a stage?
Ask for written reasons and a list of defects. Fix them and request sign-off again. If the client will not certify finished work, your dated photos, site diary and notices become your evidence.
Sources
- Mondaq (Udo Udoma & Belo-Osagie): An overview of the Nigerian Withholding Tax Regulations of 2024 (11 Jul 2024) · accessed Oct 2026
- Techeconomy: FG introduces new payment system (TMRAS) to replace Remita (4 Mar 2025) · accessed Oct 2026
- Forvis Mazars: VAT and Nigeria's 2025 tax reforms, key changes for businesses (16 Mar 2026) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.