Equity funding can be provided by project sponsors, private equity funds, impact investors and individuals. 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. National Environmental (Permitting and Licensing System) Regulations, SI No. Fixed and floating charges over all the project company's assets and receivables, bank accounts. 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. 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 The contractual provisions that govern or limit liability include provisions dealing with any of the following: Indemnities on account of losses caused by delay. Approval of project documents by lenders. 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. Typically, third parties and end users are not parties to the construction contract(s) and cannot enforce an action for breach against the contractors for the designs and construction. WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. The insurance must have a value that is at least three times the total annual emoluments of all the employees. Webprofessionals in the Built Industry to develop an harmonised scale of fees. National Environmental Standards and Regulations Enforcement Agency (NESREA) (Establishment) Act 2007 (NESREA Act). 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. The company would also be liable to pay other applicable taxes and to make contributions to various funds such as the industrial training fund, employee compensation fund, and pension fund. These include the: Abia State Public Private Partnership and Investment Promotion Law of 2016. Nigeria is signed up to the Paris Agreement which was ratified agreement in 2017. Act (, Architects must be licensed by the Architects Registration Council of Nigeria under the Architect (Registration, etc.) Fee proposed 10% of cost of Annual Services. 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. Fee proposed is 10% of Gross Rent Payable, or Gross Proceeds of Sale/Purchase. 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). The obligations under the EGASPIN are in addition to any other environmental compliance requirement set out under any other law. In the few cases where contracts involving Nigerian parties provide for institutional arbitration, the parties tend to choose local Nigerian arbitration institutions such as the Chartered Institute of Arbitrators (UK) Nigerian Branch or the Lagos Regional Centre for International Commercial Arbitration. Webprofessionals in the Built Industry to develop an harmonised scale of fees. This paper concerns an investigation into the causes of high costs of construction in Nigeria. The most heavily negotiated provisions are those relating to the contractor's liability in specific events of default. 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. An EIA must be undertaken where the extent, nature or location of a proposed project or activity is likely to have a significant effect on the environment. Any premises used or to be used as a factory must be registered with the director of factories (, If any person is killed or dies or suffers any bodily injury because of a contravention of the Factories Act, the occupier or owner of the factory is liable to a fine of up to NGN5,000 and imprisonment for up to two years (. The preferred developer is selected through an open competitive bidding process in compliance with the PPA. 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%. Generally, a contractor has no obligation to personally perform all the works involved in the project unless expressly obliged under the agreement. Basis of Professional Charges for Consulting Services 4.3. The repayment of the loan is structured in accordance with a repayment schedule by way of amortisation, or very rarely, a bullet repayment. 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. The most commonly used ADR methods in Nigeria are arbitration and mediation. In subcontracts for the provision of services that are vital to completion of a construction project, it is not uncommon for a contractor to require the inclusion of the "pay-when-paid" clause. The Factories Act also provides that where an offence is committed by a body corporate, every director, manager, secretary or other similar officer of the body corporate is guilty of that offence and liable as if they had committed that offence unless they prove that the act or omission constituting the offence took place without their consent, knowledge, connivance or neglect. In addition to local Nigerian laws, some foreign anti-corruption and anti-bribery laws have extra-territorial effect and may apply to certain categories of persons in relation to actions that are connected with Nigeria. 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. Act (. Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. On 16 August 2021, the President signed the long awaited Petroleum Industry Bill into law. Debt providers include Development Finance Institutions, multilateral agencies, commercial banks, Export Credit Agencies. Act) (, Money Laundering Prohibition Act 2011 (as amended) (MLPA). Advised Kepco Energy Resources Ltd on the financing of its acquisition of Egbin Power PLC. 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. Advised Actis on its investment in the 459 MW Azura-Edo gas fired independent power plant in Edo State. The General Conditions of Contract for the procurement of works 2011. Various states in Nigeria have also passed laws regulating PPP projects in their states. 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. A project company is required to obtain expatriate quota approvals for the relevant number of expatriate personnel it intends to employ. The rates payable will depend on which of Nigeria's 36 states the real property is located in. 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%. Parties generally have a choice over the applicable arbitration rules. 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. If passed, the proposed legislation will establish a framework for Nigerian professionals to be given preference in the implementation of construction projects in Nigeria. It also contains information on the legal, financial, environmental and technical aspects of the proposed project. Establishing a contract-based electricity market. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. The current monthly minimum wage prescribed by the National Minimum Wage Act 2019 (NMWA) is NGN30,000. This Scale was used for the next 14 years until 1992 when it was revised. d) PSGS 4: Property Management. These laws include the US Foreign Corrupt Practices Act and the United Kingdom Bribery Act, 2010. 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. However, it is common for a contractor's obligations to be qualified to the extent that once the contractor has used its best endeavours or has applied the degree of skill and care that could reasonably be expected from a professional of its status, the project company is obliged to accept the completed project. Cost is a vital element in every development. 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. 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 (. Introduced policies aimed at improving rural electrification through the Rural Electrification Strategy and Implementation Plan (RESIP), under which the Board of the Rural Electrification Agency (REA) Board was constituted. The relationships between employers, contractors and subcontractors are typically governed by ordinary principles of contract law. Construction & Engineering Laws and Regulations Nigeria 2022-2023. 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. It is uncommon for payment obligations under construction contracts to be secured by land or property. Time or Duration Based Fees CHAPTER FIVE: Adjustment of Fees 5.1. 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. Basis of Professional Charges for Consulting Services 4.3. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. Professional Bodies in Nigerian Construction Industry. Table of Professional Charges 4.5. Parties to construction contracts in Nigeria typically negotiate their contracts on the basis of a draft prepared by their advisers including lawyers. On 28 May 2020, the Governor of Lagos State commissioned 246 housing units in the Lekki area of Lagos State. In relation to projects in the private sector, the process of appointment depends on the internal rules developed by project sponsors. The Nigerian construction industry struggled in 2020 due to disruptions caused by the COVID-19 outbreak and the subsequent lockdown measures. WebFee is to be negotiated subject to a minimum of N50,000=. For both local and international projects, a syndicate of lenders typically provide the debt financing but some local projects are funded on a bilateral basis. In this revision, the starting band was increased from N250,000.00 to N5 Million. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. 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. The licences and other consents a project must obtain will depend on the industry. Improving power supply reliability to meet growing demand. 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. Where possible, promote positive impacts. 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. 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. Rules of the Chartered Institute of Arbitration (UK). N60m (estimated project cost) multiplied by a minimum of 7.5% (scale of fees for new projects). The railway is currently being extended to the Lagos Port to ease import and export of goods. The PPA also requires procurement to be conducted in a manner that is: Equitable for ensuring accountability and conformity with its provisions (with the aim of achieving value for money and fitness of purpose). The NESREA Act also regulates the effect of a project on the environment. There is no specific law on how construction disputes should be resolved in Nigeria. The proposed project is submitted to the Federal Executive Council (FEC) for approval. 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. Fee proposed 10% of Gross Rent Payable. There are various mechanisms available to Nigerian companies for mitigating taxes, depending on the nature of the transaction and the project. 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. Ibom Deep Seaport project, which is nearing realisation, following the opening of the bid process in Lagos which was won by Bollore Africa in November 2018. National Environmental (Electrical/Electronic Sector) Regulations, SI No. The provisions that commonly govern contract variations are those that regulate issuing change orders or additional work. Under the terms of the contract, a sub-contractor can suspend work or terminate a sub-contract on a main contractor becoming insolvent. The two major funding models for local and international projects in Nigeria are: Equity, including mezzanine finance. 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). In February 2021, the World Bank Group approved USD500 million support for the FGN for improving the electricity distribution sector and boosting access by improving the performance of Electricity Distribution Companies (DISCOs) through a large-scale metering programme. The PPP model has been implemented in various sectors of the Nigerian economy such as ports, transportation (road, rail, water and airports), health, housing, education, free trade zones, and most recently, in the electric power sector. In practice, an eight to nine-hour working day is the norm. Tertiary education tax of 2% of its assessable profit. 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. Some engineering, procurement and construction contracts for local projects are also drafted on the basis of the template developed by the International Federation of Consulting Engineers (. Banks and Other Financial Institutions Act 2020 (BOFIA), Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Act (. 0% if its turnover is less than NGN25,000,000. Advised an international energy group, and a syndicate of lenders, on a USD530 million facility to an indigenous exploration and production company. The Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Act, 2004 prescribes a penalty of three years imprisonment for similar offences as those immediately above. The current administration has also budgeted NGN4.125 trillion (about USD9.9 billion) for capital expenditure in the 2021 Appropriation Act. Sponsors and project developers often incorporate those requirements into a contract as part of the employer's requirements of the contractor. ensure that the working environment cannot reasonably constitute a health hazard to the employees; make adequate provision for the protection of the health of its workers; insure all employees against injury to health or other forms of physical injury, accident or death that may occur in the course of duty. None of these contract forms are mandatory. Where the FEC is satisfied that the project should be carried out using a PPP, it grants its approval to the project. 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. Draft EIA to be carried out and a report submitted to the DRP at the end of the project conceptual design and will form the basis for approval by the DPR of the detailed engineering design. There are 3 stages of payment. 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. 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. 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: 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. 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. 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. e) PSGS 5: Facility Management. The Labour Act provides that normal work hours are to be fixed by mutual agreement, collective bargaining, or by an industrial wages board. In this revision, the starting band was increased from N250,000.00 to N5 Million. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. 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. This paper concerns an investigation into the causes of high costs of construction in Nigeria real property is located.! 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