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. 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. This can be done as currently there are no thin capitalisation rules in Nigeria and parties can take advantage of this. Time or Duration Based Fees CHAPTER FIVE: Adjustment of Fees 5.1. 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. 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. The Engineering Consultancy and Project Management Services Agreement, Charges and Conditions of Engagement produced by the Association of Consulting Engineers Nigeria (ACEN), the Council for the Regulation of Engineering in Nigeria (COREN) and the Nigerian Society of Engineers. 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. 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. The two pieces of primary legislation that govern environmental issues in Nigeria are the: Environmental Impact Assessment Act (EIA Act). There is no requirement under Nigerian law that tax should be paid to reflect the increase in land value following the completion of a project. Webprofessionals in the Built Industry to develop an harmonised scale of fees. Advised the International Finance Corporation (IFC), a member of the World Bank Group, in connection with its investment in a 120MW greenfield solar photovoltaic (PV) power project in Kogi State, Nigeria. 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. Act) (, Money Laundering Prohibition Act 2011 (as amended) (MLPA). Lekki Deep Seaport project is also being developed as a PPP between the federal Government of Nigeria, the Lagos State Government and Tolaram Group. e) PSGS 5: Facility Management. There is no limit to the number of hours an employee can work in a day. There is also no compulsory levy to fund local infrastructure. WebFee is to be negotiated subject to a minimum of N50,000=. There are other non-compulsory insurance products, such as erection all risk insurance, that a contractor or project company will typically procure. In practice, an eight to nine-hour working day is the norm. Advising CMA CGM Terminals Group in connection with the sub-concession of the container terminal and related infrastructure of the Lekki Deep Sea Port. 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 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. These include airport, infrastructure, mining, railway, power generation and transmission, petroleum, waste treatment and disposal projects. Contracts for the KanoJibia and Port Harcourtaiduguri lines were confirmed by the Federal Executive Council. High debt-servicing costs and low tax revenue also left little scope for fiscal spending and new public projects. An alternative is to include a direct payment clause which allows for the employer to step in and pay the subcontractor directly where the contractor fails or is unable to make payments. The project owner typically takes the following risks: Risk of ground conditions, including any archaeological discoveries or ionisation and contamination of the soil. Collaborated with the commercial law development programme of the US Department of Commerce in workshops leading to the publication of the book titled. 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%. Debt providers include Development Finance Institutions, multilateral agencies, commercial banks, Export Credit Agencies. The EFCC Act prohibits anyone from concealing, removing from Nigeria or transferring to nominees, the proceeds of an economic and financial crime, on behalf of another, with the knowledge that such proceeds are as a result of criminal conduct by the principal. Preliminary EIA to be carried out at the end of the concept selection studies. 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. 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). 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. 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. Launched an initiative under the REA, as part of the NESP, to roll out five million new solar-based connections in communities that are not grid connected. For example, most of the roads networks in Nigeria are still in bad shape. Strengthening the sector's institutional framework and increasing transparency. 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%): This is broken down into. 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. d) PSGS 4: Property Management. However, Nigeria currently builds just 2,000 houses per year. 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. Factories Act. 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. 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 Employee Compensation Act 2010 established the Employees' Compensation Fund (Fund) and requires every employer to make a minimum monthly contribution of 1% of its total monthly payroll into the Fund. This Scale was used for the next 14 years until 1992 when it was revised. 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. 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. USD3 billion methanol production plant at Brass in Bayelsa State. The Q&A gives a high level overview of the main trends and significant deals; the main parties; procurement arrangements; transaction structures and corporate vehicles; financing projects; security and contractual protections that funders require; standard forms of contracts; risk allocation; excluding liability, including caps and force majeure; contractual provisions covering material delays and variations; appointing and paying contractors; subcontractors; licences and consents; projects insurance; labour laws; health and safety; environmental issues; corrupt business practices and bribery; bankruptcy/insolvency; public private partnerships (PPPs); dispute resolution; tax and mitigating tax liability; the main construction organisations; and proposals for reform. 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. 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. 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 working hours of all other employees are governed by their respective contracts of employment. Builders must be licensed by the Nigerian Institute of Building. Advised NG Power-HPS Limited in connection with the acquisition of majority shares in First Independent Power Limited. Both equity and debt financing will typically be used in the same project usually at a ratio of 70% debt to 30% equity. 23, 2011. Act (. 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 (. 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. 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. 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 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. Basis of Professional Charges for Consulting Services 4.3. Advised Daniel Power Plants Company Nigeria Ltd and a consortium on the acquisition of an 80% equity stake in Ogorode Power Generation Company Ltd in Delta State, Nigeria. 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. Corporate guarantee from the sponsors (and sponsors' parent companies in international projects). Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. 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. 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 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. Engage in direct procurement in cases of emergency. 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. Sponsors and project developers often incorporate those requirements into a contract as part of the employer's requirements of the contractor. Cost is a vital element in every development. State governments have also embarked on projects aimed at providing affordable housing for citizens. 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. Typically, contractors are allocated all the following risks: Risk of compliance with applicable law and regulation. The relationships between employers, contractors and subcontractors are typically governed by ordinary principles of contract law. The Lagos-Ibadan Standard Gauge rail began commercial operations in 2021. 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. Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. 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. 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). 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 Borno state government has commenced an Owner Occupier scheme for 2,787 housing units in the state. According to the Minister of Transport, the Kano-Maradi rail is aimed at facilitating bilateral trade between Nigerian and Niger. Establishing a contract-based electricity market. 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). 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. Time or Duration Based Fees CHAPTER FIVE: Adjustment of Fees 5.1. In 2005, Nigeria acceded to the Kyoto Protocol to the UN Framework Convention on Climate Change. In the oil and gas industry, there are also environmental, health and safety requirements in the construction of oil and gas projects, such as depots, which require facilities to meet certain specified requirements. 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 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. Parties generally have a choice over the applicable arbitration rules. An arbitral award is both binding and enforceable by Nigerian courts. This paper concerns an investigation into the causes of high costs of construction in Nigeria. Under these rules. 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. One which promotes competition, economy and efficiency. The Protocol has not yet been enacted in local legislation and, therefore, it is not yet being strictly enforced. 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 Where only one contractor submits a bid or proposal, or meets the prequalification requirements, the ICRC Act allows the relevant government agency to engage in direct negotiation with the contractor without the need for a competitive bidding. The entitlement of consultants to recovery from third parties in respect of additional costs or delays depends on the terms of their contracts and appointments. The modes of appointment of construction professionals in Nigeria vary between the public sector and the private sector. The circumstances described can be expressed to be non-exhaustive in their scope. The deal was valued at USD414.9 billion. Currently leading the team advising a US company in connection with the development of a 30MW Coal fired power plant in Nigeria. The private sector has also shown an increased appetite for investment in real estate. Assignment of rights in the project documents, insurance policies, hedging arrangements, future and present undertaking, and so on. Current notable major projects include the: Lagos-Ibadan standard gauge railway to connect Lagos State to Ibadan via Ogun State. The current administration has also budgeted NGN4.125 trillion (about USD9.9 billion) for capital expenditure in the 2021 Appropriation Act. 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. e) PSGS 5: Facility Management. Typically, they are based on the FIDIC Silver Book. In some instances, there could be a combination of more than one funding arrangement, for instance, a term loan facility and a revolving credit facility being provided under a single financing arrangement to a project. The 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. Generally, a contractor has no obligation to personally perform all the works involved in the project unless expressly obliged under the agreement. Where a project involves the FGN, the procurement and tender process is usually supervised by the Infrastructure Concession Regulatory Commission and the Bureau for Public Procurement. 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. 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 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). d) PSGS 4: Property Management. 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. 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 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. 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. However, this rate does not apply to persons occupying executive, administrative, technical or professional positions such as engineers, engineering technologists, engineering technicians, engineering craftspersons, and project managers. Although a subcontract is derived from the main contract, it is a stand-alone contract creating contractual rights and obligations strictly between the parties to it. 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 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. Basis of Professional Charges for Consulting Services 4.3. 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. 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. The procurement legislation in Nigeria are set out in the Public Procurement Act 2007 (PPA) (including the Public Procurement (Goods and Works) Regulations 2007 and the Public Procurement (Consultancy Services) Regulations 2007 made under the PPA) and the Infrastructure Concession Regulatory Commission Act, 2005 (ICRC Act). Covenants, representations and warranties. In relation to projects in the private sector, the process of appointment depends on the internal rules developed by project sponsors. It also contains information on the legal, financial, environmental and technical aspects of the proposed project. The USD11.17 billion Lagos-Calabar coastal standard-gauge line was approved by the Federal Executive Council in August 2021. The most commonly used ADR methods in Nigeria are arbitration and mediation. Data provided by the National Bureau of Statistics (NBS) shows that the construction sector grew by only 1.42% in Q1 2021 from 1.21% in Q4 2020. In 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. 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. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. 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! 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. 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 Types of Professional Fees 4.2. 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%. Under the terms of the contract, a sub-contractor can suspend work or terminate a sub-contract on a main contractor becoming insolvent.