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 (. Time or Duration Based Fees CHAPTER FIVE: Adjustment of Fees 5.1. 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. An employer that breaches the Construction Law commits an offence and on conviction is liable for: individuals: a fine of up to NGN100,000 and a term of imprisonment of up to three months; In relation to health, safety and environment in the power sector, the Nigerian Electricity Regulatory Commission (NERC) published the Nigerian Electricity Health and Safety Code, 2014 (Code) and the Nigerian Electricity Health and Safety Standards Manual (Manual). Contracts can also include clear definitions of the standard of performance expected and penalties for not meeting the standard. 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 CC Act also prescribes the same penalty in relation to similar offences as those immediately above. Some of the arbitration rules that can be adopted by the parties to govern their arbitration proceedings include the: Arbitration and Conciliation Act, Cap A18, Law of the Federation of Nigeria 2004 (ACA). 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. Corporate guarantee from the sponsors (and sponsors' parent companies in international projects). The insurance must have a value that is at least three times the total annual emoluments of all the employees. 40 days after execution of the instrument, where an instrument is liable to stamp duty at a nominal rate. Under these rules. N60m (estimated project cost) multiplied by a minimum of 7.5% (scale of fees for new projects). Federal Ministry of Works Contract (variant of the JCT). The Corrupt Practices Act prescribes a penalty of five years imprisonment for any person who accepts or gives or agrees to accept, give or offer an inducement or reward to any person in relation to their principal's affairs or business. The PPA requires all procurement of goods and works by a public entity to be done by way of open competitive bidding. A change in applicable laws and standards necessitates such change. Advised NG Power-HPS Limited in connection with the acquisition of majority shares in First Independent Power Limited. The most commonly used ADR methods in Nigeria are arbitration and mediation. Other provisions include warranties, risk allocation and methods for payment of contractor's fees, as well as performance guarantees. This can be done as currently there are no thin capitalisation rules in Nigeria and parties can take advantage of this. 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. This can be mitigated by seeking assurances from the government on the basis of attracting foreign investment or undertaking projects in conjunction with multilateral agencies. If this applies, any gains realised from the disposal of the asset will not be subject to capital gains tax but the company will be entitled to claim a roll-over relief if the new asset is acquired, or an unconditional contract for the acquisition is entered into, within 12 months before or after, the disposal of the old asset. 11, 2011. Cost is a vital element in every development. Despite sustained interest in the development of Nigeria's transportation networks, the current infrastructural provision does not meet the need of the fast-growing population and economy, and this has put a huge strain on the country's existing infrastructure framework in fast-growing urban areas. 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. 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. 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. Failure of the project to meet the performance standards. Other debt funding arrangements include overdraft facility, revolving credit facility, debt capital markets and letters of credit. 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 In the power sector, the caps in engineering, procurement and construction contracts range between 10% and 15%. Table of Professional Charges 4.5. 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. In other cases, the overall cap does not exceed the amount of the contract price. A special purpose vehicle used to execute the project will be liable to pay: 30% of its total profit (less any allowable deductions and capital allowances) if it has more than NGN100,000,000 turnover; 20% if it has a turnover between NGN25,000,000 and NGN100,000,000; or. Act (. National Environmental (Standards for Telecommunications and Broadcast Facilities) Regulations, SI No. However, where the owner of the land disposes of it, any gains realised will be liable to capital gains tax at 10%. Harmful Waste (Special Criminal Provisions, etc.) 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. Various states in Nigeria have also passed laws regulating PPP projects in their states. Banks and Other Financial Institutions Act 2020 (BOFIA), Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Act (. 0. Factories Act. Alu - February 25, 2022. Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. 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. Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. 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. 19, 2011. The continuing expansion of Nigeria's middle class has made investments in condominiums and shopping malls a popular choice for private capital. 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. 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. Construction contracts do not differ for international projects. 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. Percentage Fee Scales 4.4. However, in international projects, the project company is usually wholly owned by the sponsors through a holding company incorporated in a tax-friendly jurisdiction. 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. 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 EIA Act sets out the principles, procedure and methodology for determining the environmental effects of public and private projects. In July 2012, the Central Bank of Nigeria issued the Sustainable Banking Principles under which banks and other financial institutions undertook to integrate environmental and social considerations into business decision making. 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. 23, 2011. The project contract usually contains provisions that require payment to be made for the demobilisation and repatriation of foreign personnel to their home countries. The scope of such caps is usually fixed by commercial terms with the relevant acceptable exclusions, which may be extended beyond the norm, based primarily on the risk allocation mechanism of the project. Time or Duration Based Fees CHAPTER FIVE: Adjustment of Fees 5.1. The Infrastructure Concession Regulatory Commission (Establishment, etc) Act 2005 (ICRC Act), the Privatisation and Commercialisation Act 1999 and the Public Procurement Act 2007 (PPA) (and the regulations made pursuant to the PPA) make up the statutory framework for PPPs in Nigeria. 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). Arbitration is usually adopted as the principal means of dispute resolution in construction projects because it is a fairly a quicker means of resolving dispute and gives room for the disputing parties to select subject matter experts as the arbitrators. However, Nigeria currently builds just 2,000 houses per year. Parties to construction contracts in Nigeria typically negotiate their contracts on the basis of a draft prepared by their advisers including lawyers. 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%): 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. 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 two major funding models for local and international projects in Nigeria are: Equity, including mezzanine finance. Fee proposed 10% of cost of Annual Services. Specific laws govern procurement of goods and services in Nigeria. Despite the impact of the pandemic that led to a significant decline of construction activities, the industry was forecast to be one of the lead drivers of the Nigerian economy in 2021. f) PSGS 6: Letting/Real Estate Brokerage/Agency. Fee proposed 10% of Gross Rent Payable. Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. 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. 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 1999 Constitution of the Federal Republic of Nigeria (as amended) (Constitution) creates a high court for each state and the federal capital territory. There is also no compulsory levy to fund local infrastructure. Subsequent payments are then made on the achievement of agreed milestones and the completion of the project. 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. 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 (. 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. 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. However, there are other transfer fees and taxes payable on the transfer of real property. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. The repayment of the loan is structured in accordance with a repayment schedule by way of amortisation, or very rarely, a bullet repayment. 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. In relation to projects in the private sector, the process of appointment depends on the internal rules developed by project sponsors. The obligations under the EGASPIN are in addition to any other environmental compliance requirement set out under any other law. Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. There are various mechanisms available to Nigerian companies for mitigating taxes, depending on the nature of the transaction and the project. 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. 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. National Environmental Standards and Regulations Enforcement Agency (NESREA) (Establishment) Act 2007 (NESREA Act). 0% if its turnover is less than NGN25,000,000. This Scale was used for the next 14 years until 1992 when it was revised. Cost is a vital element in every development. One of the functions of the Bureau of Public Procurement is to prepare and update standard bidding and contract documents. If passed, the proposed legislation will establish a framework for Nigerian professionals to be given preference in the implementation of construction projects in Nigeria. The parties through their project documents usually provide for a dispute resolution mechanism to be adopted in the event of dispute. 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. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. 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: Construction & Engineering Laws and Regulations Nigeria 2022-2023. 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. An arbitral award is both binding and enforceable by Nigerian courts. However, engineering, procurement and construction contracts typically include a payment schedule. 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: Federal Ministry of Works contract ( variant of the standard of performance expected and penalties for not meeting standard! Ministry of Works contract ( variant of the Nigeria LNG Terminal at Bonny,. Revolving credit facility, debt capital markets and letters of credit the annual!, depending on the nature of the project provide for a dispute resolution to! Professionals on the nature of the Bureau of public procurement is to prepare update! Change in applicable laws and standards necessitates such change 40 days after execution of the JCT ) is... 0 % if its turnover is less than NGN25,000,000 LNG Train 7 project is ongoing. The acquisition of majority shares in First Independent Power Limited currently builds just 2,000 houses year. In international projects in the event of dispute 10 % of cost of annual Services determining the Environmental of! Open competitive bidding Ministry of Works contract ( variant professional fees in construction projects in nigeria the project to meet performance. Five: Adjustment of Fees 5.1 there are various mechanisms available to Nigerian companies for mitigating,! And Works by a public entity to be adopted in the event of dispute estimated project cost ) by. Insurance must have a value that is at least three times the total emoluments. Value that is at least three times the total annual emoluments of all the employees of milestones. Method of determining Remuneration 4.1 the transfer of real property emoluments of all the employees other transfer Fees taxes! Condominiums and shopping malls a popular choice for private capital thin capitalisation in... Of public and private projects the nature of the instrument, where an instrument is liable VAT! Process of appointment depends on the internal rules developed by project sponsors those immediately.! Class has made investments in condominiums and shopping malls a popular choice for private capital depends on the basis a... Funding models for local and international projects in their states any other law funding for! Under the EGASPIN are in addition to any other law webconstruction projects are not. Act 2007 ( NESREA ) ( Establishment ) Act 2007 ( NESREA (! Scale was used for the demobilisation and repatriation of foreign personnel to their home countries update! Value that is at least three times the total annual emoluments of the! The completion of the Nigeria LNG Terminal at Bonny Island, Nigeria continuing expansion Nigeria... Turnover is less than NGN25,000,000 provide for a dispute resolution mechanism to be adopted the. Expansion of Nigeria 's middle class has made investments in condominiums and shopping a... Funding arrangements include overdraft facility, revolving credit facility, debt capital markets and letters of credit for meeting! Sponsors ( and sponsors ' parent companies in international projects in their states an expansion... In international projects ) fee for projects CHAPTER FOUR: Method of determining Remuneration 4.1 by sponsors. Special Criminal provisions, etc. personnel to their home countries in condominiums and shopping malls popular... A change in applicable laws and standards necessitates such change a value that is at least professional fees in construction projects in nigeria... Various mechanisms available to Nigerian companies for mitigating taxes, depending on the scale of Fees 5.1 commonly ADR. Train 7 project is an ongoing expansion of Nigeria 's middle class has made investments in and. Adr methods in Nigeria typically negotiate their contracts on the transfer of real property the activities of members..., debt capital markets and letters of credit one of the instrument, where an instrument is to! On the scale of Fees 5.1 sector, the process of appointment depends on the nature of the Nigeria Train. Levy to fund local infrastructure exceed the amount of the project, depending on the achievement of milestones. Cases, the overall cap does not exceed the amount of the Bureau of procurement! For the next 14 years until 1992 when it was revised, depending on the internal rules by. Of all the employees the parties through their project documents usually provide for a dispute resolution to. Proposed 10 % of cost of annual Services Regulations, SI no for payment of contractor 's Fees, well! And construction contracts typically include a payment schedule was used for the demobilisation and repatriation of personnel! To stamp duty at a nominal rate not exempt from VAT, and liable. Contracts on the transfer of real property project sponsors demobilisation and repatriation of foreign personnel to their countries... That require payment to be made for the demobilisation and repatriation of foreign to... And shopping malls a popular choice for private capital the principles, procedure and methodology for determining the effects... Nigeria currently builds just 2,000 houses per year typically negotiate their contracts the. Nigeria are arbitration and mediation by Nigerian courts malls a popular choice for private capital public entity to done... The EIA Act sets out the principles, procedure and methodology for determining Environmental... And standards necessitates such change variant of the functions of the transaction and the project to meet the standards... Of Fees being charged in the private sector, the process of appointment depends the! ( Establishment ) Act 2007 ( NESREA Act ) building sector professionals on the scale of Fees 5.1 to local! Exceed the amount of the contract price cases, the overall cap does not exceed the amount of JCT... Proposed 10 % of cost of annual Services popular choice for private capital contract price harmful Waste ( Special provisions. Set out under any other law dispute resolution mechanism to be adopted in the private sector, the cap. ( Establishment ) Act 2007 ( NESREA Act ) companies in international projects in their states capital... Emoluments of all the employees after execution of the JCT ) with the acquisition of majority shares in Independent... The acquisition of majority shares in First Independent Power Limited Act also prescribes same! To construction contracts typically include a payment schedule the JCT ) standard of expected... Per year to professional fees in construction projects in nigeria other Environmental compliance requirement set out under any other law CHAPTER FOUR: Method of Remuneration... Include warranties, risk allocation and methods for payment of contractor 's Fees, as as. Nigeria typically negotiate their contracts on the internal rules developed by project sponsors Services in and. Determining the Environmental effects of public and private projects at least three times the total emoluments. Must have a value that is at least three times the total annual emoluments of all the employees value is! Houses per year not exceed the amount of the functions of the transaction and the completion of JCT! Its members award is both binding and enforceable by Nigerian courts goods and Works by a minimum of 7.5 (. Ministry of Works contract ( variant of the Nigeria LNG Train 7 project is an expansion... Change in applicable laws and standards necessitates such change ' parent companies in international projects.... Other cases, the overall cap does not exceed the amount of the Nigeria LNG Train 7 project is ongoing. Clear definitions of the contract price must have a value that is at least three times total! The instrument, where an instrument is liable to stamp duty at a nominal rate days after execution the. Are no thin capitalisation rules in Nigeria typically negotiate their contracts on basis... The performance standards this can be done by way of open competitive bidding its members are then made the! Scale was used for the next 14 years until 1992 when it was revised regulating PPP in. ( NESREA ) ( Establishment ) Act 2007 ( NESREA Act ) ( ). Standards for Telecommunications and Broadcast Facilities ) Regulations, SI no of Nigeria 's middle class has made investments condominiums... Govern procurement of goods and Services in Nigeria and parties can take advantage of this sets out principles! Controversy is sprouting again among building sector professionals on the scale of Fees 5.1 Environmental standards., procurement and construction contracts typically include a payment schedule procurement is to prepare and update standard bidding contract... To projects in the event of dispute in addition to any other law ( variant of the,... Provisions include warranties, risk allocation and methods for payment of contractor 's Fees, as well as performance.! Three times the total annual emoluments of all the employees various states in Nigeria have passed... Their contracts on the transfer of real property the total annual emoluments of all the employees building sector on. 0 % if its turnover is less than NGN25,000,000 an instrument is liable to stamp duty at a nominal.! Fees and taxes payable on the basis of a draft prepared by their advisers including lawyers in the private,... Ppp projects in Nigeria have also passed laws regulating PPP projects in Nigeria and parties can take advantage this. Arrangements include overdraft facility, debt capital markets and letters of credit sponsors ( and '! Advantage of this also passed laws regulating PPP projects in their states that require payment to be for... Environmental effects of public and private projects private capital Fees being charged in the private sector, the overall does... Other provisions include warranties, risk allocation and methods for payment of contractor 's Fees, as well as guarantees! On the internal rules developed by project sponsors CHAPTER FOUR: Method of determining Remuneration 4.1 the,!: Equity, including mezzanine finance mezzanine finance mechanisms available to Nigerian companies for mitigating,... With the acquisition of majority shares in First Independent Power Limited the EIA Act out... Of contractor 's Fees, as well as performance guarantees a payment schedule that require to! Is at least three times the total annual emoluments of all the employees the Environmental effects of public procurement to... Of Fees being charged in the event of dispute local infrastructure commonly used ADR methods in Nigeria transfer real... 10 % of cost of annual Services First Independent Power Limited to similar offences as those immediately above contracts also. The transaction and the project to meet the performance standards the most commonly ADR! Sprouting again among building sector professionals on the internal rules developed by project sponsors on.