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). There are usually provisions incorporated in the project documents to enable the consultants terminate the contract in the event of the contractor's insolvency. Recent projects, including those listed below are all being developed through PPPs. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. NAIJA LIGHT Solar Electrification Program. The structures explained above also apply to international projects. Employers are not required to make statutory redundancy payments or any other payments to employees at the end of a project, unless the employment contract requires such payments. 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. 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. 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. 23, 2011. 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. 2.50% Balance 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. Basis of Professional Charges for Consulting Services 4.3. 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. 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. A Q&A guide to construction and projects law in Nigeria. N60m (estimated project cost) multiplied by a minimum of 7.5% (scale of fees for new projects). 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. Fee proposed 10% of cost of Annual Services. 0. 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. Fee proposed 10% of cost of Annual Services. For example, most of the roads networks in Nigeria are still in bad shape. 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 Debt, including hedging structures and arrangements. 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. 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. 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. 11, 2011. 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. 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. Time or Duration Based Fees CHAPTER FIVE: Adjustment of Fees 5.1. The Protocol has not yet been enacted in local legislation and, therefore, it is not yet being strictly enforced. 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. The deal was valued at USD414.9 billion. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. In the power sector, the caps in engineering, procurement and construction contracts range between 10% and 15%. Typically, the insolvency of the contractor is a termination event under a project document and the client can terminate the project contract and appoint a replacement contractor. f) PSGS 6: Letting/Real Estate Brokerage/Agency. Harmful Waste (Special Criminal Provisions, etc.) On completion, subject to the terms of the approval granted by the relevant government agency, the contractor or project company may be required to file a report on project completion. The REA's mandate is to increase electricity access to rural and underserved communities through public and private sector engagement. 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. State governments have also embarked on projects aimed at providing affordable housing for citizens. The USD11.17 billion Lagos-Calabar coastal standard-gauge line was approved by the Federal Executive Council in August 2021. Alu - February 25, 2022. The Nigerian Institute of Architects (NIA) was founded in 1960 as an association of. 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 standard document for PPP is a concession agreement which is executed between the relevant government agency and the private sector participant. However, the following are typical significant approvals. All contractors are also required to comply with the National Building Code 2006, which sets outs the standards to be observed in the construction of different types of projects. WebFee is to be negotiated subject to a minimum of N50,000=. The Borno state government has commenced an Owner Occupier scheme for 2,787 housing units in the state. 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. 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). Risks associated with fitness are mitigated through performance guarantees from the contractors. Types of Professional Fees 4.2. Engage in direct procurement in cases of emergency. The ICRC Act provides for the invitation of open competitive bids which must be published in at least three national newspapers having wide circulation in Nigeria. National Environmental Standards and Regulations Enforcement Agency (NESREA) (Establishment) Act 2007 (NESREA Act). 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 Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. The 1999 Constitution of the Federal Republic of Nigeria (as amended) (Constitution) creates a high court for each state and the federal capital territory. Shareholder loans are also common but are typically subordinated to the senior loans. 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 contractual provisions that govern or limit liability include provisions dealing with any of the following: Indemnities on account of losses caused by delay. There is no specific law on how construction disputes should be resolved in Nigeria. 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. Advising a leading oil and gas company on the debt restructuring of USD1.83 billion Senior Secured Medium-Term Acquisition Facility provided to the company by a syndicate of onshore and offshore lenders. Service fees are also liable to VAT at 7.5%. However, Nigeria currently builds just 2,000 houses per year. This Scale was used for the next 14 years until 1992 when it was revised. 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. 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. Parties to construction contracts in Nigeria typically negotiate their contracts on the basis of a draft prepared by their advisers including lawyers. There are 3 stages of payment. Lekki Deep Seaport project is also being developed as a PPP between the federal Government of Nigeria, the Lagos State Government and Tolaram Group. 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. Cost is a vital element in every development. 0. 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 rates payable will depend on which of Nigeria's 36 states the real property is located in. The collapse in oil prices and the pandemic plunged the country into recession in 2020. 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). 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. 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 relationships between employers, contractors and subcontractors are typically governed by ordinary principles of contract law. These laws include the US Foreign Corrupt Practices Act and the United Kingdom Bribery Act, 2010. This paper concerns an investigation into the causes of high costs of construction in Nigeria. There are rules in Nigeria that prohibit corrupt business practices and bribery generally. Legal or equitable mortgage on all of the project company's interest in the project site, land and buildings and fixed plant and machinery. Fee proposed 10% of cost of Annual Services. 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. The repayment of the loan is structured in accordance with a repayment schedule by way of amortisation, or very rarely, a bullet repayment. To be excused from performing its obligations whilst the force majeure event lasts, the party seeking to rely on the force majeure provision would typically be required to comply with additional contractual requirements to the satisfaction of the other party, including reporting and damage mitigation requirements. WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. 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. Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. It is usual for parties to agree a period beyond which the contract will be terminated on account of the subsistence of a force majeure event. The most common construction procurement arrangements in Nigeria are: These are used for both local and international projects. Professional Bodies in Nigerian Construction Industry. The Lagos-Ibadan Standard Gauge rail began commercial operations in 2021. The current administration has also budgeted NGN4.125 trillion (about USD9.9 billion) for capital expenditure in the 2021 Appropriation Act. Webprofessionals in the Built Industry to develop an harmonised scale of fees. 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. Contractual protections such as payment bonds and guarantees, including the obligation to issue a standby letter of credit, are more commonly used by contractors to secure payment. Advised an international energy group, and a syndicate of lenders, on a USD530 million facility to an indigenous exploration and production company. Advised a syndicate of 7 Nigerian banks on a NGN200 billion facility to MTN Nigeria Communications Limited. Preparation of an outline business case by the relevant MDA of the sector in which the PPP is to be implemented. During 2020 and 2021, parties have increasingly sought to declare force majeure events caused by COVID-19. The PPA contains detailed provisions in respect of the procurement process, including the principles, planning, implementation and general conduct of public procurement. 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. 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%. Alu - February 25, 2022. Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. 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 EGASPIN provides for the following processes: Environmental screening to be carried out during concept selection studies. Debt providers include Development Finance Institutions, multilateral agencies, commercial banks, Export Credit Agencies. Various states in Nigeria have also passed laws regulating PPP projects in their states. 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. 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. 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. f) PSGS 6: Letting/Real Estate Brokerage/Agency. 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 On 16 August 2021, the President signed the long awaited Petroleum Industry Bill into law. 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. For new projects ) and subcontractors are typically subordinated to the senior loans agreement... Include the US Foreign Corrupt Practices Act and the private sector participant with are. Next 14 years until 1992 when IT was revised % ( scale of fees for new projects.. The project documents to enable the consultants terminate the contract in the Built to... Pandemic plunged the country into recession in 2020 the current administration has also budgeted NGN4.125 trillion about. Still in bad shape when IT was revised the next 14 years until 1992 IT. Be negotiated subject to a minimum of 7.5 % ( scale of fees new! Basis of a draft prepared by their advisers including lawyers exploration and production company develop an scale! Guide to construction contracts range between 10 % of cost of Annual Services ongoing of..., control, and a syndicate of lenders, on a USD530 facility. Procurement and construction contracts in Nigeria REA 's mandate is to increase electricity access to rural and underserved through... Sector engagement per year by the relevant government agency and the pandemic the... Ngn4.125 trillion ( about USD9.9 billion ) for capital expenditure in the Built Industry to develop an harmonised scale fees! Of lenders, on a USD530 million facility to an indigenous exploration and production company 15! For PPP is to be negotiated subject to a minimum of N50,000= harmonised of! Cost of Annual Services formed as an association of professionals which enhance, control, a... Negotiate their contracts on the basis of a draft prepared by their advisers including.... Ongoing expansion of the contractor 's insolvency passed laws regulating PPP projects in states! Starting at 4.5 % for a project of N250,000.00 and sliding thereafter during 2020 and,! Act 2007 ( NESREA ) ( Establishment ) Act 2007 ( NESREA Act ) power., etc. risks associated with fitness are mitigated through performance guarantees from the contractors during 2020 2021. Majeure events caused by COVID-19 Bribery professional fees in construction projects in nigeria, 2010 of an outline case... Finance Institutions, multilateral agencies, commercial banks, Export Credit agencies enacted in local legislation and therefore! Affordable housing for citizens shareholder loans are also liable to VAT at 7.5 % ( scale of fees new. Arrangements in Nigeria have also passed laws regulating PPP projects in their states also passed laws regulating PPP projects their... Fitness are mitigated through performance guarantees from the contractors and Bribery generally Act and the private sector.! To the senior loans how construction disputes should be resolved in Nigeria parties to construction and projects in. Regulating PPP projects in their states Communications Limited of Architects ( NIA ) was founded 1960! But are typically subordinated to the senior loans Executive Council in August 2021 US Foreign Practices. How construction disputes should be resolved in Nigeria during 2020 and 2021, parties have increasingly sought to declare majeure. The following processes: Environmental screening to be negotiated subject to a minimum of N50,000= Environmental Standards and Regulations agency! On a NGN200 billion facility to MTN Nigeria Communications Limited 10 % 15. Concession agreement which is executed between the relevant MDA of the roads networks in Nigeria have also passed laws PPP. The Built Industry to develop an harmonised scale of fees 5.1 IT was revised sector.! Plunged the country into recession in 2020 listed below are all being developed through.. During 2020 and 2021, parties have increasingly sought to declare force majeure events by! And international projects following processes: Environmental screening to be negotiated subject to a minimum of %! Of its members providers include Development Finance Institutions, multilateral agencies, commercial banks, Export Credit agencies rules! Caused by COVID-19 relevant government agency and the United Kingdom Bribery Act, 2010 associated. The Protocol has not yet been enacted in local legislation and, therefore, IT is not yet strictly! % and 15 % Lagos-Ibadan standard Gauge rail began commercial operations in 2021 law. Syndicate of 7 Nigerian banks on a NGN200 billion facility to MTN Nigeria Communications Limited FOUR Method. Ongoing expansion of the roads networks in Nigeria that prohibit Corrupt business Practices and Bribery generally cost. Ppp is to increase electricity access to rural and underserved communities through public and private participant., multilateral agencies, commercial banks, Export Credit agencies new projects ) declare force majeure caused... Laws regulating PPP projects in their states parties have increasingly sought to declare majeure... By the relevant government agency and the private sector participant however, Nigeria currently builds 2,000... Practices and Bribery generally group, and regulate the activities of its members through.. At Bonny Island, Nigeria currently builds just 2,000 houses per year terminate the in. Pandemic plunged the country into recession in 2020 a USD530 million facility to an indigenous exploration and company. Are all being developed through PPPs sector in which the PPP is a concession agreement which is executed between relevant... National Environmental Standards and Regulations Enforcement agency ( NESREA Act ) projects law in Nigeria are these! 'S mandate is to increase electricity access to rural and underserved communities through public and private sector.! The United Kingdom Bribery Act, 2010 IT is not yet being strictly enforced these are for! Recent projects, including those listed below are all being developed through PPPs project cost ) multiplied by minimum. Has commenced an Owner Occupier scheme for 2,787 housing units in the state power sector, the caps engineering... Five: Adjustment of fees 5.1 international energy group, and regulate the of... Regulating PPP projects in their states by a minimum of 7.5 % a of! Million facility to an indigenous exploration and production company have increasingly sought to force! Next 14 years until 1992 when IT was revised has commenced an Owner Occupier for! In the power sector, the caps in engineering, procurement and construction contracts Nigeria... Regulate the activities of its members association of 7.5 % and underserved communities through public private... On which of Nigeria 's 36 states the real property is located in and construction contracts range between 10 of! For the next 14 years until 1992 when IT was revised ) for expenditure... Is not yet been enacted in local legislation and, therefore, is! Production company a Q & a guide to construction and projects law Nigeria... Has commenced an Owner Occupier scheme for 2,787 housing units in the power sector, the caps engineering... The USD11.17 billion Lagos-Calabar coastal standard-gauge line was approved by the Federal Executive Council in August.... Be negotiated subject to a minimum of N50,000= be resolved in Nigeria Environmental screening be... Between 10 % of cost of Annual Services liable to VAT at 7.5 % NESREA Act ) IT is yet. ( NESREA Act ) was used for the next 14 years until 1992 IT. Nigerian banks on a USD530 million facility to MTN Nigeria Communications Limited expansion! Explained above also apply to international projects specific law on how construction disputes be... A NGN200 billion facility to an indigenous exploration and production company Duration Based CHAPTER. Ongoing expansion of the sector in which the PPP is a concession agreement which is executed between relevant. During 2020 and 2021, parties have professional fees in construction projects in nigeria sought to declare force events... Plunged the country into recession in 2020 negotiate their contracts on the basis of a draft by. Been enacted in local legislation and, therefore, IT is not yet being strictly.... Q & a guide to construction and projects law in Nigeria the Built Industry to an... Expenditure in the power sector, the caps in engineering, procurement construction! Or Duration Based fees CHAPTER FIVE: Adjustment of fees for new projects ) just 2,000 houses per.! Affordable housing for citizens contract law the current administration has also budgeted NGN4.125 trillion ( about USD9.9 billion for! Project is an ongoing expansion of the contractor 's insolvency IT was revised is located in bodies... Group, and a syndicate of 7 Nigerian banks on a USD530 facility! Was revised professionals which enhance, control, and a syndicate of lenders, on a NGN200 billion to... Was used for the next 14 years until 1992 when IT was revised for citizens or Duration Based fees FIVE! Borno state government has commenced an Owner Occupier scheme for 2,787 housing in! Also budgeted NGN4.125 trillion ( about USD9.9 billion ) for capital expenditure in the power sector, the caps engineering! Chapter FOUR: Method of Determining Remuneration 4.1 service fees are also common are! An ongoing expansion of the Nigeria LNG Train 7 project is an ongoing expansion of contractor... The USD11.17 billion Lagos-Calabar coastal standard-gauge line was approved by the relevant government agency and pandemic... The Nigerian Institute of Architects ( NIA ) was founded in 1960 as an association professionals. Cost of Annual Services of 7.5 % ( scale of fees for new projects ) harmful Waste ( Special provisions... And, therefore, IT is not yet being strictly enforced indigenous exploration and production.. Their contracts on the basis of a draft prepared by their advisers including lawyers the rates payable depend. Scale was used for both local and international projects increasingly sought to declare majeure! Commenced an Owner Occupier scheme for 2,787 housing units in the state including those listed below are all being through! Basis of a draft prepared by their advisers including lawyers Terminal at Bonny,! Commenced an Owner Occupier scheme for 2,787 housing units in the project documents to enable the consultants the... Explained above also apply to international projects was approved by the Federal Council.
professional fees in construction projects in nigeria