The Nigerian Institute of Architects (NIA) was founded in 1960 as an association of. 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. Contracts for the KanoJibia and Port Harcourtaiduguri lines were confirmed by the Federal Executive Council. Lekki Deep Seaport project is also being developed as a PPP between the federal Government of Nigeria, the Lagos State Government and Tolaram Group. 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. 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. Final EIA to be prepared and approval obtained at the end of detailed engineering design but before the commencement of any construction activities. byNicholas Okafor, Adeola Sunmola, Victor Samuel and Chisom Okolie, Udo Udoma and Belo-Osagie. 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. The provisions that commonly govern contract variations are those that regulate issuing change orders or additional work. This law is expected to provide a much-needed overhaul of the Nigeria's oil and gas sector, thereby creating multiplier effects across the entire construction chain and the economy. Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. The two pieces of primary legislation that govern environmental issues in Nigeria are the: Environmental Impact Assessment Act (EIA Act). 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. Act) (, Money Laundering Prohibition Act 2011 (as amended) (MLPA). There are 3 stages of payment. The most common forms of dispute resolution in Nigeria are litigation and arbitration. Economic loss can be excluded but, in some cases, the counter party may require certain aspects of the economic loss to be mitigated through performance guarantees, although these may specify a maximum amount recoverable from the contractor in the form of liquidated damages. Fee proposed is 10% of Gross Rent Payable, or Gross Proceeds of Sale/Purchase. The modes of appointment of construction professionals in Nigeria vary between the public sector and the private sector. Strengthening the sector's institutional framework and increasing transparency. 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. 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. 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 can be done as currently there are no thin capitalisation rules in Nigeria and parties can take advantage of this. This Scale was used for the next 14 years until 1992 when it was revised. The obligations imposed on the contractor or construction professional will depend largely on the parties to the contract. 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 Lagos-Ibadan Standard Gauge rail began commercial operations in 2021. The Nigerian construction industry struggled in 2020 due to disruptions caused by the COVID-19 outbreak and the subsequent lockdown measures. During 2020 and 2021, parties have increasingly sought to declare force majeure events caused by COVID-19. However, Nigeria currently builds just 2,000 houses per year. 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. The PPA requires all procurement of goods and works by a public entity to be done by way of open competitive bidding. In this revision, the starting band was increased from N250,000.00 to N5 Million. In many cases, the project company is a joint venture entity between a local sponsor and a foreign entity that will provide technical or management services to the project. Member of the team that advised Falcon Kinetics Limited on the Construction of the Civil and Structural Works for the development of a 4,000MT LPG Bulk Gas Storage Facility and Jetty Project at Rumuolumeni, Saipem/Aker Base Road, Port Harcourt, Rivers State, Nigeria. Professional Bodies in Nigerian Construction Industry. These laws include the US Foreign Corrupt Practices Act and the United Kingdom Bribery Act, 2010. 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. NAIJA LIGHT Solar Electrification Program. Act (. Due to the increasing cost of key infrastructure projects in the country and dwindling government financing, the government has used public private partnership (PPP) arrangements to finance projects for which the government is not able to secure debt financing, for example the: Highway Development and Management Initiative, a PPP, which is expected to attract over NGN1 trillion in private investment for the development and maintenance of road networks. The most common corporate structure for projects in Nigeria is a private company limited by shares. Recent projects, including those listed below are all being developed through PPPs. Tertiary education tax of 2% of its assessable profit. Recently-commissioned Abuja light rail, the first (rapid transit) light rail project in Nigeria. However, in international projects, the project company is usually wholly owned by the sponsors through a holding company incorporated in a tax-friendly jurisdiction. The proposed project is submitted to the Federal Executive Council (FEC) for approval. 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. 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. The main stages are: Selection of projects in each sector to be implemented on a PPP basis by the relevant ministry, department and agency (MDA) charged with the responsibility of regulating that sector. The Pension Reform Act 2014 imposes an obligation on employers to obtain life insurance cover for all their employees. In other cases, the overall cap does not exceed the amount of the contract price. 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. In addition to the EIA Act, the Environmental Guidelines and Standards for the Petroleum Industry in Nigeria (EGASPIN), which apply specifically to the oil and gas industry, requires an EIA to be carried out when constructing certain oil and gas facilities, including oil and gas pipelines, crude oil production facilities, tank farms, hydrocarbon processing facilities, product depots, waste treatment/disposal facilities and so on. 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. Under these rules. Builders must be licensed by the Nigerian Institute of Building. Under the terms of the contract, a sub-contractor can suspend work or terminate a sub-contract on a main contractor becoming insolvent. 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. 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 Typically, they are based on the FIDIC Silver Book. The parties must also ensure that the service is not being carried on illegally and must comply with local content requirements set out in either regulations or executive orders made by the President of Nigeria. In relation to construction professionals, each profession usually has a scale of professional fees which is applied to calculate the fees payable to the professional for the services provided on the project. The VAT Act 2004 (as amended) and the Finance Act 2020 impose VAT on the value of the consideration for the supply or purchase of goods and services in Nigeria except where those goods and services are expressly exempted from the tax. This is, however, a contractual right and can only be exercised if it is included in the project document. Put and call options (that is, the right of the equity financiers or sponsors to compel the government to repurchase the assets or shares of the project company in the event that the project is expropriated or faces significant local risks). WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. Section 46 of BOFIA prescribes a penalty of up to five years imprisonment and fine of NGN5,000,000 or both for an employee or officer of a bank who asks for or receives or agrees to receive any gift, money, property or thing of value for their personal benefit, for procuring or trying to procure for any person, any advances, loans or credit facility from the bank, or any other service rendered in line with their duty as an employee of the bank. 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. 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 (. 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. 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. Renewable Energy Village in Kakuri, Kaduna State. The two major funding models for local and international projects in Nigeria are: Equity, including mezzanine finance. However, the following are typical significant approvals. Service fees are also liable to VAT at 7.5%. 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. 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. 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. 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! 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. 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. 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. The relationships between employers, contractors and subcontractors are typically governed by ordinary principles of contract law. 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. The circumstances described can be expressed to be non-exhaustive in their scope. The project is currently at the pre-engineering state which is estimated to be completed in 10 months. WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. 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 typically include caps on liability. Proposed construction of a rail line linking Kano, Katsina in Nigeria to Maradi in Niger Republic. 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. The Constitution also creates the Federal High Court with jurisdiction over specific subject matter. 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 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. Change in law risk. 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. 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. 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. 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 EIA must be approved by the Department of Petroleum Resources (DPR). The client has the right to suspend payments to the contractor by issuing a pay less notice ,if this can be done, within the prescribed timeframe under the contract. e) PSGS 5: Facility Management. Construction professionals will usually seek to place a cap on their liability. Percentage Fee Scales 4.4. Basis of Professional Charges for Consulting Services 4.3. 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. Equity funding can be provided by project sponsors, private equity funds, impact investors and individuals. 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. The MDA sends out an invitation for bids from interested private sector developers. For projects in the public sector, parties are mandatorily required to comply with procurement rules and regulations. Advised New Electricity Development Company Ltd on the acquisition of Ikeja Electricity Distribution PLC. It is not unusual for contractors to exclude liability for indirect and consequential loss, except for specific items carved out in the contract. Construction & Engineering Laws and Regulations Nigeria 2022-2023. This paper concerns an investigation into the causes of high costs of construction in Nigeria. The preferred developer is selected through an open competitive bidding process in compliance with the PPA. Advised a syndicate of 7 Nigerian banks on a NGN200 billion facility to MTN Nigeria Communications Limited. 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. 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. In addition, parties can execute a direct agreement with the third party which will contain terms such as step-in rights provisions to enable the third party step in and assume the obligations and rights of the project sponsor under the contract where a certain agreed event occurs. 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. The working hours of all other employees are governed by their respective contracts of employment. Guidelines for the Development of Local Content in the Nigerian Electricity Supply Industry. In addition, the foreign nationals being employed must obtain a residence and work permit on entry into Nigeria to enable them to both live and work in Nigeria. The interest payment on a loan to fund a construction project is an allowable deduction before arriving at the taxable profits. The concept of PPPs as an alternative to the funding of public utilities is gradually gaining popularity in Nigeria. National Environmental (Electrical/Electronic Sector) Regulations, SI No. The General Conditions of Contract for the procurement of works 2011. 0. 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.) Types of Professional Fees 4.2. Both equity and debt financing will typically be used in the same project usually at a ratio of 70% debt to 30% equity. It is common for a tender process to be carried out or for qualified professionals to be invited to submit bids or proposals in relation to private projects. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. 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. 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. 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. The PPA contains detailed provisions in respect of the procurement process, including the principles, planning, implementation and general conduct of public procurement. Assignment of rights in the project documents, insurance policies, hedging arrangements, future and present undertaking, and so on. Failure to stamp an instrument will render it inadmissible as evidence in any civil proceedings before any Nigerian court. Most government and private agencies usually have standard form letters that are issued to a selected bidder, and the use of engagement letters is quite common. (. There is no specific law on how construction disputes should be resolved in Nigeria. 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. The project company usually has no assets other than the project and will be the borrower under the financing agreements and a party to the project agreements. In practice, an eight to nine-hour working day is the norm. There is currently no VAT on the transfer of real property in Nigeria. Covenants, representations and warranties. However, engineering, procurement and construction contracts typically include a payment schedule. Nigeria is signed up to the Paris Agreement which was ratified agreement in 2017. London Court of International Arbitration Rules. 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. There is no limit to the number of hours an employee can work in a day. In 2020, the FGN issued a NGN162.5 billion (about USD393.4 million). National Environmental (Standards for Telecommunications and Broadcast Facilities) Regulations, SI No. Some projects are procured as wrapped-around engineering, procurement and construction projects. 0. 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. Standard forms of contracts prepared by the Joint Contract Tribunal (JCT). 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. 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). Cost is a vital element in every development. 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: 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. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. The most common form of debt financing in Nigeria is a term loan facility which is a committed loan facility, under which the project company is allowed to request a lump sum of capital from the funders (usually in tranches) within an agreed period. WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. Advised NG Power-HPS Limited in connection with the acquisition of majority shares in First Independent Power Limited. 23, 2011. Alu - February 25, 2022. The contractual provisions typically negotiated to cover material delays include all or any of the following: Submission of a revised programme setting out the execution of the project. 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. 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. 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 EFCC Act provides different punishments for different offences, including a term of imprisonment of three years or more and a fine equivalent to the value of the proceeds of the crime or both where a person commits an offence of concealing, removing from Nigeria or transferring to nominees, the proceeds of an economic and financial crime. Debt, including hedging structures and arrangements. Where possible, promote positive impacts. 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. Section 2(i), part 2 of the Manual makes detailed provisions on fire safety, protection, evacuation, first responders and emergency planning. 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. In the power sector, the caps in engineering, procurement and construction contracts range between 10% and 15%. The slow implementation of government budgets, however, has been a perennial problem in Nigeria. There are usually no restrictions on the client's right to terminate the contract in the event of the contractor's bankruptcy or insolvency, unless otherwise stated in the contract. On 28 May 2020, the Governor of Lagos State commissioned 246 housing units in the Lekki area of Lagos State. Other provisions include warranties, risk allocation and methods for payment of contractor's fees, as well as performance guarantees. The structures explained above also apply to international projects. The funders may decide to call for the performance bond or take out the parent company guarantee provided by the contractor where such exists. 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. Types of Professional Fees 4.2. 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. 19, 2009. Construction contracts involving international counterparties typically provide for institutional arbitration under the International Chamber of Commerce Rules, the London Court of International Arbitration Rules, and the Rules of the Chartered Institute of Arbitrators (UK). 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. Fgn issued a NGN162.5 billion ( about USD393.4 Million ) ( rapid transit ) light rail the... 2014 imposes an obligation on employers to obtain life insurance cover for all their employees all employees... The General Conditions of contract law: equity, including mezzanine finance eight to nine-hour day... 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