There are no specific laws in the Nigerian construction industry that give a contractor the right to maintain a lien on the employer's property or over the project where there is a payment default. This Scale was used for the next 14 years until 1992 when it was revised. The licences and other consents a project must obtain will depend on the industry. The MDA sends out an invitation for bids from interested private sector developers. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. 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 PPA requires all procurement of goods and works by a public entity to be done by way of open competitive bidding. Currently leading the team advising a US company in connection with the development of a 30MW Coal fired power plant in Nigeria. The project contract usually contains provisions that require payment to be made for the demobilisation and repatriation of foreign personnel to their home countries. With regard to construction contracts (local or international), where parties have agreed to submit their disputes to Nigerian courts, most of the cases are filed in the state high courts. WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. The EFCC Act defines economic and financial crimes as non-violent criminal and illicit activity committed with the objective of earning wealth illegally, either individually or in a group or organised manner and includes any form of fraud, narcotic drug trafficking, money-laundering, embezzlement, bribery, looting and any form of corrupt malpractice, illegal arms deal, smuggling, human trafficking and child labour, illegal oil bunkering and illegal mining, tax evasion, foreign exchange malpractices including counterfeiting of currency, theft of intellectual property and piracy, open market abuse, dumping of toxic wastes and prohibited goods, among others. Final EIA to be prepared and approval obtained at the end of detailed engineering design but before the commencement of any construction activities. 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. Nigeria is a federation comprised of 36 states and the federal capital territory, Abuja. In addition, if the sponsors are executing a project for a government entity this may require the sponsors to adopt a selection process that complies with the PPA. The circumstances described can be expressed to be non-exhaustive in their scope. Other sanctions imposed under the EFCC Act include the forfeiture of assets (both within and outside Nigeria) and the freezing of bank accounts maintained by a person accused of the commission of a financial crime. Various states in Nigeria have also passed laws regulating PPP projects in their states. However, the following are typical significant approvals. Implementing clear policies that promote and encourage investor confidence in the sector. 650,000 barrels-per-day capacity oil refinery being constructed by the Dangote Group in Lagos. From the table above, an architect commissioned to undertake a project with an estimated total cost (ETC) of N 18,200,500 will be entitled to a professional fee of N823,521.25 Nevertheless, the proportion of the above total fee payable to the architect is determined by the amount of work done. Cost is a vital element in every development. Some projects are procured as wrapped-around engineering, procurement and construction projects. Representations and warranties (the breach of which could trigger an event of default). There are 3 stages of payment. 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). 30 days after execution where an instrument is liable to an ad valorem rate. A construction agreement is liable to nominal stamp duty of NGN500 on an original and NGN50 on each counterpart. Act (. Where possible, promote positive impacts. The principal local Nigerian anti-corruption and anti-bribery legislation are as follows: Corrupt Practices and other Related Offences Act 2004 (, Economic and Financial Crimes Commission (Establishment, etc. In 2005, Nigeria acceded to the Kyoto Protocol to the UN Framework Convention on Climate Change. f) PSGS 6: Letting/Real Estate Brokerage/Agency. Where the dispute relates to the construction project itself, it is the high court of the state where the asset is located that would have jurisdiction over the dispute. 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. 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. Types of Professional Fees 4.2. National Environmental Standards and Regulations Enforcement Agency (NESREA) (Establishment) Act 2007 (NESREA Act). 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. Withholding tax of 10% on any dividend paid (unless it has a tax exemption), although if the recipient of the dividend is located in a country with which Nigeria has a double tax treaty, the rate would be reduced to 7.5%. The Nigerian construction industry struggled in 2020 due to disruptions caused by the COVID-19 outbreak and the subsequent lockdown measures. 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. Table of Professional Charges 4.5. Fee proposed 10% of cost of Annual Services. 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. byNicholas Okafor, Adeola Sunmola, Victor Samuel and Chisom Okolie, Udo Udoma and Belo-Osagie. The continuing expansion of Nigeria's middle class has made investments in condominiums and shopping malls a popular choice for private capital. Advised a syndicate of lenders in connection with the amendments to, and increase in the size of a loan of approximately USD530 million to Shoreline Natural Energy Resources Limited, a Nigerian oil and gas exploration and production company. The PPA contains detailed provisions in respect of the procurement process, including the principles, planning, implementation and general conduct of public procurement. Other debt funding arrangements include overdraft facility, revolving credit facility, debt capital markets and letters of credit. 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 2020, the FGN issued a NGN162.5 billion (about USD393.4 million). In this revision, the starting band was increased from N250,000.00 to N5 Million. Banks and Other Financial Institutions Act 2020 (BOFIA), Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Act (. Following the selection process in the case of public sector, a formal notification of appointment is issued to the preferred bidder, following which a formal contract is then negotiated between the government agency and the bidder. Professional Bodies in Nigerian Construction Industry. Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. Parties generally have a choice over the applicable arbitration rules. The EIA Act specifies different types of projects in respect of which a mandatory study must be conducted. 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. 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. e) PSGS 5: Facility Management. Act) (, Money Laundering Prohibition Act 2011 (as amended) (MLPA). 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. A contractor may be permitted, either expressly or impliedly, to delegate the performance of its obligations to subcontractors who may have particular skills or resources that the contractor does not possess. Some contracts also include provisions permitting the contractor to initiate a change proposal where the contractor considers that: A request by the client will have a technical or financial impact on the project. 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. Advised Kepco Energy Resources Limited, the joint venture company established by the Sahara Energy Group and Korea Electric Power Corporation, in connection with its acquisition of a 70% equity interest in Egbin Power Plc. Parties to construction contracts in Nigeria typically negotiate their contracts on the basis of a draft prepared by their advisers including lawyers. 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. For example, most of the roads networks in Nigeria are still in bad shape. It also includes provisions on the bidding process, bid security, evaluation of bids. 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. 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 Advising a leading energy company in connection with the restructuring of loan facilities worth an aggregated USD723 million, aimed at mitigating the impact of the devaluation of the Naira on its business. Engage in direct procurement in cases of emergency. 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%): Section 15(1) of the MLPA prescribes a penalty of ten years imprisonment for any person found guilty of converting or transferring resources or properties derived directly from bribery and corruption with the aim of either concealing or disguising the illicit origin of the resources or property or aiding any person involved to evade the illegal consequences of their action. There are usually no restrictions on the project sponsor's or the lenders' right to terminate the contract in the event of the contractor's bankruptcy or insolvency, unless otherwise stated in the contract. London Court of International Arbitration Rules. Deep-sea port with a railway project connecting Calabar with Port Harcourt and Onne Deep Sea Port. Fixed and floating charges over all the project company's assets and receivables, bank accounts. In the case of state governments, the relevant PPP office co-ordinates the procurement and tender process in accordance with the state's PPP law (if any). In this revision, the starting band was increased from N250,000.00 to N5 Million. 2.50% Balance Construction contracts typically include caps on liability. There are 3 stages of payment. The insurance must have a value that is at least three times the total annual emoluments of all the employees. Where the project involves the provision of utilities, the project company will usually prefer to impose absolute obligations on the contractor (to the effect that the completed project must be fit for a particular purpose and remain fit for a specified period). 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 Advised Kepco Energy Resources Ltd on the financing of its acquisition of Egbin Power PLC. The EGASPIN provides for the following processes: Environmental screening to be carried out during concept selection studies. The most common forms of dispute resolution in Nigeria are litigation and arbitration. However, the application of these fee scales is usually not mandatory and parties can instead agree that a lump sum will be paid in instalments at agreed milestones or generally agree on a satisfactory fee payment structure. There are rules in Nigeria that prohibit corrupt business practices and bribery generally. (. From the table above, an architect commissioned to undertake a project with an estimated total cost (ETC) of N 18,200,500 will be entitled to a professional fee of N823,521.25 Nevertheless, the proportion of the above total fee payable to the architect is determined by the amount of work done. Although there are no specific tax incentives for infrastructure projects in Nigeria, there are incentives that cut across all sectors of the Nigerian economy. This paper concerns an investigation into the causes of high costs of construction in Nigeria. The main tax issues which arise on projects include whether there will be value added tax, the applicable rate of stamp duty on the transaction document(s), and transfer taxes in relation to land or other property. The Protocol has not yet been enacted in local legislation and, therefore, it is not yet being strictly enforced. However, Nigeria currently builds just 2,000 houses per year. e) PSGS 5: Facility Management. In practice, an eight to nine-hour working day is the norm. Other sector specific laws on PPP includes the Electric Power Sector Reforms Act 2005 for the electricity sector; and the Federal Highways Act Cap F13 LFN 2004 for the transport sector. The fact that the employer has given their consent to the delegation of some of the main contractor's obligations to a subcontractor does not, therefore, give rise to any contractual relationship between the employer and the subcontractor and there is no privity of contract between the employer and subcontractor. During 2020 and 2021, parties have increasingly sought to declare force majeure events caused by COVID-19. Change in law risk. 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. 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. This Scale was used for the next 14 years until 1992 when it was revised. The Act provides that any person who deals with harmful waste without lawful authority is guilty of an offence. Advised NG Power-HPS Limited in connection with the acquisition of majority shares in First Independent Power Limited. The FGN is taking steps towards reducing the infrastructure deficit through increased spending as part of a 30-year infrastructure plan (National Integrated Infrastructure Master Plan) (Infrastructure Plan) with a target date of 2043, which aims to bring Nigeria's infrastructure stock to the GDP level recommended by the World Bank. The structures explained above also apply to international projects. Advising a leading Nigerian broadband communication solution integrator on the financing of fibre optic cables and the restructuring of existing debt; Advising IFC in connection with the proposed facilities of up to USD325 million to a liquefied natural gas company in Nigeria. The Lagos-Ibadan Standard Gauge rail began commercial operations in 2021. Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. There is currently no VAT on the transfer of real property in Nigeria. The two pieces of primary legislation that govern environmental issues in Nigeria are the: Environmental Impact Assessment Act (EIA Act). The transaction, which is valued at USD311.2 million, involved the sale of three power stations by the Rivers State Government to the investor. Harmful Waste (Special Criminal Provisions, etc.) High debt-servicing costs and low tax revenue also left little scope for fiscal spending and new public projects. 0. Alu - February 25, 2022. Act (. It is not clear whether a common law mechanic's lien will apply to construction projects where the contractor is unpaid. 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 WebFind pre-contract professional fees 5% of construction cost = R$108,875 (R$2,000,000.00 to R$4,000,000.00 Range) Contract Value/Building Gross Floor Area = 2,177,500.00/347m2 = R$6275.22 per m2 Pre-contract professional fees 5% of R$6275.22 = R$313.76 per m2 of gross floor area Stage A 7.5% of R$313.76 = R$23.53 per m2 Failure of the project to meet the performance standards. 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! Another right of the client is to take physical possession of and secure the site. ICLG - Construction & Engineering Laws and Regulations - Nigeria Chapter covers common issues in construction & engineering laws and regulations including making construction projects, supervising construction contracts, and dispute resolution. 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). Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. Professional Bodies in Nigerian Construction Industry. The most common construction procurement arrangements in Nigeria are: These are used for both local and international projects. The arbitration institutions commonly used to settle construction disputes in Nigeria are: Chartered Institute of Arbitrators, UK (Nigerian Branch) (, International Chamber of Commerce (ICC) (, International Centre for Settlement of Investment Disputes (ICSID) (, London Court of International Arbitration (LCIA) (, Lagos Regional Centre for International Commercial Arbitration. Advising Jotna and Engee PET Manufacturing Company Nigeria in connection with the construction and development of a 150,000-metric tonne per annum continuous polymerization polyethylene terephthalate (PET) resin plant in Ogun State, Nigeria. The modes of appointment of construction professionals in Nigeria vary between the public sector and the private sector. 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. The Stamp Duties Act 2004 (as amended) requires stamp duty to be paid on instruments executed in Nigeria or relating to any property situated in Nigeria or matter to be done in Nigeria. Collaborated with the commercial law development programme of the US Department of Commerce in workshops leading to the publication of the book titled. 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. Equity funding can be provided by project sponsors, private equity funds, impact investors and individuals. Percentage Fee Scales 4.4. 0. Specific laws govern procurement of goods and services in Nigeria. Basis of Professional Charges for Consulting Services 4.3. Webprofessionals in the Built Industry to develop an harmonised scale of fees. 23, 2011. A change request will trigger an obligation on the contractor to submit a proposal describing how it will implement the requested change, together with any adjustments to the project timetable and fees payable as a result of such change. In addition to these laws, various states have passed laws that regulate environmental issues in their state. These include airport, infrastructure, mining, railway, power generation and transmission, petroleum, waste treatment and disposal projects. The obligations under the EGASPIN are in addition to any other environmental compliance requirement set out under any other law. The outline business case contains information on the proposed structure of the project, the procurement process for awarding the contract as well as the resources to be used in implementing the project. WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. Advised Renewable Energy Performance Platform (REPP) and Camco Clean Energy on the management buy-out of Pas Solar Limited and its Nigerian subsidiary, Pas BBoXX limited, solar energy companies providing off-grid electricity to customers. It is uncommon for payment obligations under construction contracts to be secured by land or property. In Nigeria, force majeure events are commonly classified into the following three categories: It is not enough for a party to allege that its inability to perform a contract is as a result of circumstances beyond its control. 0. Rivers State Public-Public Participation in Infrastructure Development Law 2009. 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. There is also professional indemnity insurance which provides for cover against any liability for any damages arising due to professional negligence on the part of the professionals working on a construction project. 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). WebLowe (2003) further stated that the value added of construction is in the range of 7% to 10% for highly developed economies and around 3% to 6% for underdeveloped economies. Fee proposed 10% of Gross Rent Payable. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. The two major funding models for local and international projects in Nigeria are: Equity, including mezzanine finance. The 1999 Constitution of the Federal Republic of Nigeria (as amended) (Constitution) creates a high court for each state and the federal capital territory. In January 2021, the FGN signed a Memorandum of Understanding with a Portuguese construction firm Mota-Engil for the construction of the cross-border Kano-Maradi rail line which has an estimated construction cost of USD1.96 billion. Preparation of an outline business case by the relevant MDA of the sector in which the PPP is to be implemented. There is no limit to the number of hours an employee can work in a day. f) PSGS 6: Letting/Real Estate Brokerage/Agency. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. The interest payment on a loan to fund a construction project is an allowable deduction before arriving at the taxable profits. Strengthening the sector's institutional framework and increasing transparency. The health and safety laws applicable to construction projects include the: for an individual offender, a fine of NGN100,000 or imprisonment for up to five years; for a corporate body offender, a fine of between NGN50,000 and NGN1 million. The relationships between employers, contractors and subcontractors are typically governed by ordinary principles of contract law. Other states such as Delta, Ebonyi, Enugu, Edo, Ekiti, Gombe and the Federal Capital Territory (FCT) have all commenced affordable housing projects. WebFee is to be negotiated subject to a minimum of N50,000=. 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: 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 (. , control, and regulate the activities of its members expansion of Nigeria 's class. And sliding thereafter law mechanic 's lien will apply to construction projects % of cost of Annual Services negotiate... Construction agreement is liable to an ad valorem rate lockdown measures infrastructure development law.. Choice for private capital subject to a minimum of N50,000= the licences and other a! Could trigger an event of default ) law 2009 the norm govern issues... 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