Generally, a Nigerian national does not require any authorisations to work in Nigeria. Approval of project documents by lenders. This was intended to: Avoid, minimise or offset the negative impact of their business operations on the environment and local communities in which they operate. In addition, each licence issued by the NERC to operators in the power sector, including generation plant owners, require them to comply with Health and Safety standards, regulations and codes. Any significant expansion in the construction industry will partly depend on the pace of implementation of the Nigeria Economic Sustainability Plan (NESP), the country's post-COVID economic recovery plan, and the Economic Recovery and Growth Plan for 2017-2020 (ERGP). WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. In relation to construction projects, one mechanism is funding the project company with more debt than equity and so reducing the taxable income of the special purpose vehicle. all licensees (that is, project developers) must give first consideration to goods made in Nigeria and services provided by Nigerian firms in the award of their contracts. Where an instrument is executed outside Nigeria, stamp duty must be paid within 30 days from the date on which the instrument is first brought into Nigeria. Signed a six-year, NGN1.15 trillion (about USD3.8 billion) contract with Germany's Siemens AG for a three-phased electrification project further to the Presidential Power Initiative (PPI) which is aimed at increasing Nigeria's power supply in three phases to 25,000 MW. Professional Bodies in Nigerian Construction Industry. Fee proposed 10% of Gross Rent Payable. Fee proposed is 10% of Gross Rent Payable, or Gross Proceeds of Sale/Purchase. In this revision, the starting band was increased from N250,000.00 to N5 Million. The rates payable will depend on which of Nigeria's 36 states the real property is located in. However, Nigeria currently builds just 2,000 houses per year. Under Nigerian law, exclusion of liability is typically achieved through limitation of liability clauses. Typically, contractors are allocated all the following risks: Risk of compliance with applicable law and regulation. Fee proposed is 10% of Gross Rent Payable, or Gross Proceeds of Sale/Purchase. A Q&A guide to construction and projects law in Nigeria. Fee proposed 10% of Gross Rent Payable. Harmful Waste (Special Criminal Provisions, etc.) byNicholas Okafor, Adeola Sunmola, Victor Samuel and Chisom Okolie, Udo Udoma and Belo-Osagie. The concept of PPPs as an alternative to the funding of public utilities is gradually gaining popularity in Nigeria. Fixed and floating charges over all the project company's assets and receivables, bank accounts. Equity funding can be provided by project sponsors, private equity funds, impact investors and individuals. The structures explained above also apply to international projects. The most common forms of dispute resolution in Nigeria are litigation and arbitration. There are usually provisions incorporated in the project documents to enable the consultants terminate the contract in the event of the contractor's insolvency. Where the assets to be used in a construction project are liable to VAT, the purchaser must pay VAT on the consideration payable for such assets at the rate of 7.5%. The circumstances described can be expressed to be non-exhaustive in their scope. It also contains information on the legal, financial, environmental and technical aspects of the proposed project. If this applies, any gains realised from the disposal of the asset will not be subject to capital gains tax but the company will be entitled to claim a roll-over relief if the new asset is acquired, or an unconditional contract for the acquisition is entered into, within 12 months before or after, the disposal of the old asset. A special purpose vehicle used to execute the project will be liable to pay: 30% of its total profit (less any allowable deductions and capital allowances) if it has more than NGN100,000,000 turnover; 20% if it has a turnover between NGN25,000,000 and NGN100,000,000; or. Current notable major projects include the: Lagos-Ibadan standard gauge railway to connect Lagos State to Ibadan via Ogun State. However, there are other transfer fees and taxes payable on the transfer of real property. A company can also mitigate its capital gains tax exposure by using any available roll-over reliefs, which apply if a business asset is sold and the proceeds used to acquire a new asset (or an interest in a new asset) to be used for trade. Any person who commits an offence by act or omission, aids another to commit an offence, or counsels or procures another to commit an offence is themselves guilty of the offence and liable on conviction to imprisonment for life. The Abuja Metro Rail, the Abuja-Kaduna Rail and the 327 kilometre Itakpe-Ajaokuta-Warri Rail projects were completed in 2020. Under Nigerian Law, certain professionals must have obtained the relevant licences to engage in construction projects: Engineers must be licensed by the Council for the Regulation of Engineering in Nigeria (COREN) under the Engineers (Registration, etc) Act) (, Quantity surveyors must be licensed by the Quantity Surveyors Registration Board of Nigeria under the Quantity Surveyors (Registration, etc.) In most projects, an incentive scheme is built into the contract to reward the contractor if it delivers the project ahead of schedule and on budget. Generally, a contractor has no obligation to personally perform all the works involved in the project unless expressly obliged under the agreement. However, by law, parties are unable to cap liability arising from death and personal injury. Alu - February 25, 2022. In practice, an eight to nine-hour working day is the norm. 1 Percent of General Construction Total General Construction Estimate = $50,000,000 25% of Total General Construction = MEP Portion of the Construction = $12,500,000 MEP Design Fee: as Percentage of the MEP Construction (4%): Design Fee = $12,500,000 x 4% = $500,000 as Percentage of General Construction (25% x 4% = 1%): Recent projects, including those listed below are all being developed through PPPs. The contractors also obtain limited time warranties, typically between 12 and 24 months, from the original equipment manufacturers, which they pass on to the project owner. Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. In terms of transaction structure, a special purpose vehicle (project company) is usually set up by the sponsors for the sole purpose of implementing the project. Provided support to the commercial law development program of the United States Department of Commerce in workshops leading to the publication of the book titled. Improving power supply reliability to meet growing demand. Cost is a vital element in every development. In July 2012, the Central Bank of Nigeria issued the Sustainable Banking Principles under which banks and other financial institutions undertook to integrate environmental and social considerations into business decision making. However, Nigeria currently builds just 2,000 houses per year. The obligations imposed on the contractor or construction professional will depend largely on the parties to the contract. The entitlement of consultants to recovery from third parties in respect of additional costs or delays depends on the terms of their contracts and appointments. Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. Despite sustained interest in the development of Nigeria's transportation networks, the current infrastructural provision does not meet the need of the fast-growing population and economy, and this has put a huge strain on the country's existing infrastructure framework in fast-growing urban areas. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. Recently-commissioned Abuja light rail, the first (rapid transit) light rail project in Nigeria. Where the FGN or any of its agencies is a party to the proceedings or where the dispute relates to the executive, administrative or managerial action or inaction of the FGN (other than a simple breach of contract), the Federal High Court would have jurisdiction. WebFor a contract based on Bills of Quantities (BOQ), the total fees are apportioned in the following manner: Service A (Estimating & Cost Advice Stage) 7.5% Service B (Documentation Stage) 42.5% Service C (Contract Administration Stage) 30% Service D (Final Account Stage) 20% Provisional BOQ Contract: During 2020 and 2021, parties have increasingly sought to declare force majeure events caused by COVID-19. The current administration has also budgeted NGN4.125 trillion (about USD9.9 billion) for capital expenditure in the 2021 Appropriation Act. The Lagos State government has also partnered with Nigerian Mortgage Refinancing Company (NMRC) and private developers to construct and deliver 20,000 housing units to the state in the near future. For example, in Lagos State, the transfer fees payable on a transfer of land total 3% of the assessed fair market value of the property. Establishing a contract-based electricity market. However, the following are typical significant approvals. In the power sector, the caps in engineering, procurement and construction contracts range between 10% and 15%. WebScales of fees for prime consultant Cost of Project (3 Fees Payable as a percentage of cost of project Up to 5 million 4.73% Next 10 million or part thereof 450% Next 15 million or 4.25% Next 45 million or part thereof 4.00% Next 75 million or part thereof 3.50% Next 150 million or part thereof 3.00% Next 200 million or part thereo! e) PSGS 5: Facility Management. The modes of appointment of construction professionals in Nigeria vary between the public sector and the private sector. Rivers State Public-Public Participation in Infrastructure Development Law 2009. It is common for the funder to enter into a direct agreement with project sponsor/company and the contractor that will provide the funders with step-in rights to terminate the project contract with the contractor and appoint a replacement contractor. Alu - February 25, 2022. Escrow arrangements whereby contract prices are paid into escrow accounts held by third party banks or financial institutions for release on specified conditions also operate as a form of payment security for the contractor. In this revision, the starting band was increased from N250,000.00 to N5 Million. WebFee is to be negotiated subject to a minimum of N50,000=. Parties to construction contracts in Nigeria typically negotiate their contracts on the basis of a draft prepared by their advisers including lawyers. The railway is currently being extended to the Lagos Port to ease import and export of goods. For projects in the power sector, turnkey engineering, procurement and construction contracts between the project company and the contractor, continue to be popular, with the project having separate operation and maintenance arrangements. The Central Bank of Nigeria (CBN) and the National Insurance Commission have also issued anti-money laundering regulations applicable to the banking and financial and insurance sectors respectively. The MDA sends out an invitation for bids from interested private sector developers. The EIA Act makes it an offence for any person to embark on any activity or project that may have significant environmental effects, without having first undertaken, and submitted to the relevant government environmental agency, an Environmental Impact Assessment Report (EIA). Professional fees in building projects Structural engineering fees Rp200,000 to Rp 300,000 per square metre MEP (mechanical, electrical and plumbing) design fees Rp120,000 per square metre Quantity Surveyors fees Rp60,000 per square metre There has been an increase in the development of renewable energy projects, mostly in the form of solar photo voltaic power plants, in the northern part of the country. The Federal Government of Nigeria (FGN) is committed to growing the infrastructure industry including modernising and expanding the existing power production capacities in the country, both on-grid and off-grid. 40 days after execution of the instrument, where an instrument is liable to stamp duty at a nominal rate. Most construction contracts contain step-in right provisions that impose an obligation on the contractor to assign the subcontract to the employer in certain circumstances, for example, if the main contract is terminated. Nigeria is a federation comprised of 36 states and the federal capital territory, Abuja. Lekki Deep Seaport project is also being developed as a PPP between the federal Government of Nigeria, the Lagos State Government and Tolaram Group. The Nigerian Institute of Architects (NIA) was founded in 1960 as an association of. Basis of Professional Charges for Consulting Services 4.3. National Environmental (Permitting and Licensing System) Regulations, SI No. None of these contract forms are mandatory. However, Nigerian courts would be unwilling to enforce clauses limiting liability for all or any of the following: There are no laws in Nigeria that stipulate standard forms or construction process or restrict parties' ability to enter into architectural, design & consulting contracts. Legal or equitable mortgage on all of the project company's interest in the project site, land and buildings and fixed plant and machinery. This trend has continued in 2021, and a report published by the World Bank in June 2021 (. Engage in direct procurement in cases of emergency. There is currently a bill at the Nigerian National Assembly in connection with the development of local expertise and capacity in the Nigerian construction industry. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. In 2019, the Ministry of Works and Housing set aside a total sum of 19.8 billion naira ($55 million) for the construction of 2,383 units of housing across the 36 states of Nigeria under the National Housing Program. In this revision, the starting band was increased from N250,000.00 to N5 Million. The project is currently at the pre-engineering state which is estimated to be completed in 10 months. The interest payment on a loan to fund a construction project is an allowable deduction before arriving at the taxable profits. Equals N4.5m (architects fee for pre-contract services) Note; ARCON conditions of engagement say that these fees are the minimum that should be charged, therefore, your design circumstances may warrant a little increase in the percentage. Where the FEC is satisfied that the project should be carried out using a PPP, it grants its approval to the project. A project company is required to obtain expatriate quota approvals for the relevant number of expatriate personnel it intends to employ. It allows government agencies to: Request quotations or expressions of interest. The collapse in oil prices and the pandemic plunged the country into recession in 2020. Other debt funding arrangements include overdraft facility, revolving credit facility, debt capital markets and letters of credit. On the basis of the President's directive that every seaport should have complementary rail infrastructure, we expect to see more developments in this sector in other states in the medium to long term. Usually, the state where the construction contract is implemented or ought to be performed will determine the high court that will have jurisdiction over the contractual dispute. NAIJA LIGHT Solar Electrification Program. The EIA Act sets out the principles, procedure and methodology for determining the environmental effects of public and private projects. The flip side of this is that an estimated loss scheme (liquidated damages) is also built into the contract to subtly compel the contractor to deliver on time and on budget. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. e) PSGS 5: Facility Management. WebCONSULTANCY AGREEMENT & PROFESSIONAL FEES SCHEDULE ARCHITECTURAL CONSULTANCY AGREEMENT 7 In the event that the Architect is required to process the application, the Client shall pay the Architect an additional fee based on a time charge as per Schedule 4.11 and expenses based on cost plus 10% in respect of the processing of such Foreign engineering consultants and firms can only be engaged when the required services are rendered in collaboration with firms licensed to provide such engineering services in Nigeria (. The most heavily negotiated provisions are those relating to the contractor's liability in specific events of default. The contractual provisions that govern or limit liability include provisions dealing with any of the following: Indemnities on account of losses caused by delay. In Lagos State, under the Construction Workers Safety Law (. In other cases, the overall cap does not exceed the amount of the contract price. Final EIA to be prepared and approval obtained at the end of detailed engineering design but before the commencement of any construction activities. The principal feature of the EIA Act is that it specifically requires that any public or private sector project must not be undertaken or started without a determination of its environmental effects. 0. Extensive rehabilitation of the Lagos-Ibadan expressway, one of the largest road networks in Africa, the oldest expressway and busiest inter-state route in Nigeria. Some of the penalties under Nigerian anti-corruption laws include the following: The Corrupt Practices Act prescribes a penalty of seven years imprisonment for any person who, being a public official: corruptly asks for, receives or attempts to receive or obtains any property or benefit of any kind before or after doing or omitting to do something in an official capacity; gives, confers or procures, or promises or offers to give, confer, procure or attempt to procure, any property or benefit of any kind to or for a public officer, or any other person on account of any act performed in an official capacity. There are rules in Nigeria that prohibit corrupt business practices and bribery generally. Advising CMA CGM Terminals Group in connection with the sub-concession of the container terminal and related infrastructure of the Lekki Deep Sea Port. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. The Q&A gives a high level overview of the main trends and significant deals; the main parties; procurement arrangements; transaction structures and corporate vehicles; financing projects; security and contractual protections that funders require; standard forms of contracts; risk allocation; excluding liability, including caps and force majeure; contractual provisions covering material delays and variations; appointing and paying contractors; subcontractors; licences and consents; projects insurance; labour laws; health and safety; environmental issues; corrupt business practices and bribery; bankruptcy/insolvency; public private partnerships (PPPs); dispute resolution; tax and mitigating tax liability; the main construction organisations; and proposals for reform. In February 2021, at commissioning of a 1.12 MW Captive Solar Hybrid Power Plant at the Abubakar Tafawa Balewa University, Bauchi which was executed under the Energizing Education Programme (EEP), the FGN stated that Nigeria intends to have 30% of its electricity supply from renewables by the year 2030. The project contract usually contains provisions that require payment to be made for the demobilisation and repatriation of foreign personnel to their home countries. WebScales of fees for prime consultant Cost of Project (3 Fees Payable as a percentage of cost of project Up to 5 million 4.73% Next 10 million or part thereof 450% Next 15 million or 4.25% Next 45 million or part thereof 4.00% Next 75 million or part thereof 3.50% Next 150 million or part thereof 3.00% Next 200 million or part thereo! These include the: Abia State Public Private Partnership and Investment Promotion Law of 2016. 0% if its turnover is less than NGN25,000,000. Covenants, representations and warranties. Webprofessionals in the Built Industry to develop an harmonised scale of fees. There is no limit to the number of hours an employee can work in a day. Including provisions that require interest on delayed payments is also one of the means of ensuring that contractual payments are made promptly and diligently. WebFee is to be negotiated subject to a minimum of N50,000=. The Nigerian construction industry struggled in 2020 due to disruptions caused by the COVID-19 outbreak and the subsequent lockdown measures. Currently advising the project sponsors in connection with the 500 MW independent Gas Power Project proposed to be constructed by Oma Power Generation Limited in Abia State, Nigeria. Member of the team that advised Consolidated Infrastructure Group Ltd. on due diligence and project structuring for its investment in the development of an 8.5 MW dual fuel power project in Delta State. Some Nigerian construction contracts permit the owner to request the contractor to alter the works and services (or any part of them) through change orders, change requests, and change notices. Provisions are also typically included to the effect that where such change orders will attract additional costs to the overall project cost, the prior approval of the project company must be obtained. Cost is a vital element in every development. The NESREA has primary responsibility of enforcing compliance with laws, guidelines, policies and standards on environmental matters in Nigeria, such as water quality, noise, ozone protection, air and atmospheric protection and has issued various regulations on compliance requirements. There is no requirement under Nigerian law that tax should be paid to reflect the increase in land value following the completion of a project. Where there is a third party with an interest in the project, it is standard practice for the consultants to be required to provide specific collateral warranties in favour of the third party. The following forms of security are typically taken in infrastructure projects: Share charge on all the shares and other equity rights (present and future) of the sponsors in the project company (and holding company). The project company or relevant contractor must also obtain a fire safety certificate from the Federal Fire Service and the relevant State Fire Service to confirm compliance with fire safety measures. Standard forms of contracts prepared by the Joint Contract Tribunal (JCT). This was submitted by the Association of Consulting Engineers in Nigeria and the Nigerian Society of Engineers to the Council for the Regulation of Engineering in The current monthly minimum wage prescribed by the National Minimum Wage Act 2019 (NMWA) is NGN30,000. Expatriate Quota Approvals are granted on a temporary basis, usually for two to three years and can be renewed up to five times for up to 10 years in some instances. Both equity and debt financing will typically be used in the same project usually at a ratio of 70% debt to 30% equity. 2.50% Balance There are other non-compulsory insurance products, such as erection all risk insurance, that a contractor or project company will typically procure. Contracts can also include clear definitions of the standard of performance expected and penalties for not meeting the standard. Other contractual provisions usually heavily negotiated by the parties include: The form of security (such as payment bonds, performance bonds, bank guarantees and third-party guarantees). This Scale was used for the next 14 years until 1992 when it was revised. The common contract forms used for local projects are: The Standard Bidding and Contract Documents produced by the Bureau of Public Enterprises (for public procurement works). Recent projects include the: 67.32KW Solar Hybrid Mini Grid at Oloibiri, Bayelsa State; 234KW solar hybrid mini grid power plant in Shimankar Community, Shendam Local Government. However, these are still subject to performance risks. 11, 2011. The EFCC Act prohibits anyone from concealing, removing from Nigeria or transferring to nominees, the proceeds of an economic and financial crime, on behalf of another, with the knowledge that such proceeds are as a result of criminal conduct by the principal. Enter to open, tab to navigate, enter to select, https://content.next.westlaw.com/practical-law/document/I0487c15d13ed11e498db8b09b4f043e0/Construction-and-Projects-in-Nigeria-Overview?viewType=FullText&transitionType=Default&contextData=(sc.Default), Construction and Projects in Nigeria: Overview, https://iclg.com/practice-areas/project-finance-laws-and-regulations/nigeria. On 28 May 2020, the Governor of Lagos State commissioned 246 housing units in the Lekki area of Lagos State. Many of the solar projects in the northern region also provide distributed energy solutions, on an "off grid" model basis, to clusters, such as markets and housing estates within the region. Construction contracts involving only Nigerian parties tend to provide for ad hoc arbitration under the UNCITRAL Model Law on International Commercial Arbitration or the Nigerian Arbitration and Conciliation Act. The CC Act also prescribes the same penalty in relation to similar offences as those immediately above. 23, 2011. 19, 2011. Advised New Electricity Development Company Ltd on the acquisition of Ikeja Electricity Distribution PLC. Parties are free to determine the scope, nature and term of their contracts to the extent that the terms of those contracts do not breach the laws of Nigeria. Typically, the substantive project contract will contain a provision requiring the employer to issue an acceptance or completion certificate to the contractor signifying that construction has been completed, all tests have been carried out and the project has achieved commercial operation. The two pieces of primary legislation that govern environmental issues in Nigeria are the: Environmental Impact Assessment Act (EIA Act). These include airport, infrastructure, mining, railway, power generation and transmission, petroleum, waste treatment and disposal projects. Data provided by the National Bureau of Statistics (NBS) shows that the construction sector grew by only 1.42% in Q1 2021 from 1.21% in Q4 2020. In some instances, there could be a combination of more than one funding arrangement, for instance, a term loan facility and a revolving credit facility being provided under a single financing arrangement to a project. The contractor is, therefore, required to comply with health and safety regulations relating to employees that work in certain areas of the project or that operate certain machinery wearing protective clothing. Various states in Nigeria have also passed laws regulating PPP projects in their states. The working hours of all other employees are governed by their respective contracts of employment. In relation to projects in the private sector, the process of appointment depends on the internal rules developed by project sponsors. The slow implementation of government budgets, however, has been a perennial problem in Nigeria. e) PSGS 5: Facility Management. Although a subcontract is derived from the main contract, it is a stand-alone contract creating contractual rights and obligations strictly between the parties to it. The parties through their project documents usually provide for a dispute resolution mechanism to be adopted in the event of dispute. In addition, anything used for the carriage of harmful wastes and any premises or land where it was kept can be forfeited to the FGN. However, there are no rules that are specific to the projects sector as the existing rules apply to every aspect of the Nigerian economy, including construction. Parties to construction contracts typically agree the inclusion of provisions that permit the contract to continue, on the occurrence of events or circumstances that are not within the reasonable control of the parties and that could have a material adverse effect on their ability to perform their respective obligations. Service fees are also liable to VAT at 7.5%. 2.50% Balance There are 3 stages of payment. For projects in the public sector, parties are mandatorily required to comply with procurement rules and regulations. Fee proposed 10% of cost of Annual Services. This is broken down into. Webprofessionals in the Built Industry to develop an harmonised scale of fees. Liable to VAT at 7.5 % other transfer fees and taxes Payable on the internal developed... Current administration has also budgeted NGN4.125 trillion ( about USD9.9 billion ) for capital expenditure the! 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