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). Typically, they are based on the FIDIC Silver Book. In January 2021, the FGN signed a Memorandum of Understanding with a Portuguese construction firm Mota-Engil for the construction of the cross-border Kano-Maradi rail line which has an estimated construction cost of USD1.96 billion. Debt providers include Development Finance Institutions, multilateral agencies, commercial banks, Export Credit Agencies. The contractual provisions that govern or limit liability include provisions dealing with any of the following: Indemnities on account of losses caused by delay. 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: 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. Construction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. 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 The preferred developer is selected through an open competitive bidding process in compliance with the PPA. Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. 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. This Scale was used for the next 14 years until 1992 when it was revised. 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: 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. Advised Actis on its investment in the 459 MW Azura-Edo gas fired independent power plant in Edo State. Section 2(i), part 2 of the Manual makes detailed provisions on fire safety, protection, evacuation, first responders and emergency planning. Including provisions that require interest on delayed payments is also one of the means of ensuring that contractual payments are made promptly and diligently. 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. 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%. This clause requires a subcontractor to be paid within a specific period after the contractor has been paid that is make payment contingent on the contractor being paid. For projects in the power sector, turnkey engineering, procurement and construction contracts between the project company and the contractor, continue to be popular, with the project having separate operation and maintenance arrangements. An arbitral award is both binding and enforceable by Nigerian courts. 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. 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. There are 3 stages of payment. 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 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. 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. 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 (. Cost is a vital element in every development. One which promotes competition, economy and efficiency. These include the: Abia State Public Private Partnership and Investment Promotion Law of 2016. 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. Implementing clear policies that promote and encourage investor confidence in the sector. Failure to stamp an instrument will render it inadmissible as evidence in any civil proceedings before any Nigerian court. Risks associated with fitness are mitigated through performance guarantees from the contractors. There are usually provisions incorporated in the project documents to enable the consultants terminate the contract in the event of the contractor's insolvency. e) PSGS 5: Facility Management. 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. There is no limit to the number of hours an employee can work in a day. Fee proposed 10% of Gross Rent Payable. Time or Duration Based Fees CHAPTER FIVE: Adjustment of Fees 5.1. The most heavily negotiated provisions are those relating to the contractor's liability in specific events of default. The EGASPIN provides for the following processes: Environmental screening to be carried out during concept selection studies. 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. The following forms of security are typically taken in infrastructure projects: Share charge on all the shares and other equity rights (present and future) of the sponsors in the project company (and holding company). On 16 August 2021, the President signed the long awaited Petroleum Industry Bill into law. 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. There is currently no VAT on the transfer of real property in Nigeria. 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 Under these rules. Basis of Professional Charges for Consulting Services 4.3. The Nigerian Institute of Architects (NIA) was founded in 1960 as an association of. 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. 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. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. The two major funding models for local and international projects in Nigeria are: Equity, including mezzanine finance. Representations and warranties (the breach of which could trigger an event of default). 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. The Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Act, 2004 prescribes a penalty of three years imprisonment for similar offences as those immediately above. The 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. The two pieces of primary legislation that govern environmental issues in Nigeria are the: Environmental Impact Assessment Act (EIA Act). 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. 23, 2011. Factories Act. The Protocol has not yet been enacted in local legislation and, therefore, it is not yet being strictly enforced. Some Nigerian construction contracts permit the owner to request the contractor to alter the works and services (or any part of them) through change orders, change requests, and change notices. The Borno state government has commenced an Owner Occupier scheme for 2,787 housing units in the state. The structures explained above also apply to international projects. 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. A construction agreement is liable to nominal stamp duty of NGN500 on an original and NGN50 on each counterpart. 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. Some projects are procured as wrapped-around engineering, procurement and construction projects. 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. 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. A change request will trigger an obligation on the contractor to submit a proposal describing how it will implement the requested change, together with any adjustments to the project timetable and fees payable as a result of such change. 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. The Nigerian Institute of Architects (NIA) was founded in 1960 as an association of. The current administration has also budgeted NGN4.125 trillion (about USD9.9 billion) for capital expenditure in the 2021 Appropriation Act. Where the FEC is satisfied that the project should be carried out using a PPP, it grants its approval to the project. Webprofessionals in the Built Industry to develop an harmonised scale of fees. Act (. 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. 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. Advised Accugas Ltd on a USD445 million refinancing of facilities for the construction of a gas processing facility and the acquisition of a 100% stake in East Horizon Gas Company Ltd. The slow implementation of government budgets, however, has been a perennial problem in Nigeria. 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%. Renewable Energy Village in Kakuri, Kaduna State. 11, 2011. The NESREA Act also regulates the effect of a project on the environment. The working hours of all other employees are governed by their respective contracts of employment. Fee proposed is 10% of Gross Rent Payable, or Gross Proceeds of Sale/Purchase. Typically, contractors are allocated all the following risks: Risk of compliance with applicable law and regulation. 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. Nigeria is a federation comprised of 36 states and the federal capital territory, Abuja. 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. 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 28 May 2020, the Governor of Lagos State commissioned 246 housing units in the Lekki area of Lagos State. 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. 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. 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 addition, the NMWA does not apply to establishments that employ less than 25 persons, or in which people are employed on a part-time or piece-rate basis. 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. 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. National Environmental (Electrical/Electronic Sector) Regulations, SI No. Rules of the Chartered Institute of Arbitration (UK). 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%): The REA's mandate is to increase electricity access to rural and underserved communities through public and private sector engagement. In this revision, the starting band was increased from N250,000.00 to N5 Million. 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. London Court of International Arbitration Rules. f) PSGS 6: Letting/Real Estate Brokerage/Agency. According to the Minister of Transport, the Kano-Maradi rail is aimed at facilitating bilateral trade between Nigerian and Niger. Rivers State Public-Public Participation in Infrastructure Development Law 2009. Builders must be licensed by the Nigerian Institute of Building. WebFee is to be negotiated subject to a minimum of N50,000=. 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). 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. Key member of the team that advised Stanbic IBTC Bank PLC, as Lender's counsel, with respect to an USD11.3 million medium term loan facility advanced for the refinancing of a residential real estate development in Durunmi, Abuja. Approval of project documents by lenders. 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 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. The proposed project is submitted to the Federal Executive Council (FEC) for approval. 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. The parties through their project documents usually provide for a dispute resolution mechanism to be adopted in the event of dispute. 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. Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. The EFCC Act defines economic and financial crimes as non-violent criminal and illicit activity committed with the objective of earning wealth illegally, either individually or in a group or organised manner and includes any form of fraud, narcotic drug trafficking, money-laundering, embezzlement, bribery, looting and any form of corrupt malpractice, illegal arms deal, smuggling, human trafficking and child labour, illegal oil bunkering and illegal mining, tax evasion, foreign exchange malpractices including counterfeiting of currency, theft of intellectual property and piracy, open market abuse, dumping of toxic wastes and prohibited goods, among others. Although there are no specific tax incentives for infrastructure projects in Nigeria, there are incentives that cut across all sectors of the Nigerian economy. The insurance must have a value that is at least three times the total annual emoluments of all the employees. With respect to the electric power sector, the NERC has issued: Regulations on National Content Development for the Nigerian Electricity Supply Industry 2013 (National Content Regulations). Preliminary EIA to be carried out at the end of the concept selection studies. Covenants, representations and warranties. The Nigerian construction industry struggled in 2020 due to disruptions caused by the COVID-19 outbreak and the subsequent lockdown measures. It is not clear whether a common law mechanic's lien will apply to construction projects where the contractor is unpaid. 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. 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. 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. Parties to construction contracts typically agree the inclusion of provisions that permit the contract to continue, on the occurrence of events or circumstances that are not within the reasonable control of the parties and that could have a material adverse effect on their ability to perform their respective obligations. 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. The EIA Act specifies different types of projects in respect of which a mandatory study must be conducted. Advance Fee Fraud and Other Related Offences Act 2006. Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. Where possible, promote positive impacts. 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. This can be done as currently there are no thin capitalisation rules in Nigeria and parties can take advantage of this. The repayment of the loan is structured in accordance with a repayment schedule by way of amortisation, or very rarely, a bullet repayment. Where an instrument is executed outside Nigeria, stamp duty must be paid within 30 days from the date on which the instrument is first brought into Nigeria. A Q&A guide to construction and projects law in Nigeria. Generally, a Nigerian national does not require any authorisations to work in Nigeria. 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 Abuja Metro Rail, the Abuja-Kaduna Rail and the 327 kilometre Itakpe-Ajaokuta-Warri Rail projects were completed in 2020. Banks and Other Financial Institutions Act 2020 (BOFIA), Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Act (. Construction professionals will usually seek to place a cap on their liability. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. Strengthening the sector's institutional framework and increasing transparency. Act (, Architects must be licensed by the Architects Registration Council of Nigeria under the Architect (Registration, etc.) The project owner typically takes the following risks: Risk of ground conditions, including any archaeological discoveries or ionisation and contamination of the soil. Expatriate Quota Approvals are granted on a temporary basis, usually for two to three years and can be renewed up to five times for up to 10 years in some instances. In this revision, the starting band was increased from N250,000.00 to N5 Million. 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 generally have a choice over the applicable arbitration rules. The circumstances described can be expressed to be non-exhaustive in their scope. Advised New Electricity Development Company Ltd on the acquisition of Ikeja Electricity Distribution PLC. 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. Percentage Fee Scales 4.4. However, Nigeria currently builds just 2,000 houses per year. Time or Duration Based Fees CHAPTER FIVE: Adjustment of Fees 5.1. 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. 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). This Scale was used for the next 14 years until 1992 when it was revised. The collapse in oil prices and the pandemic plunged the country into recession in 2020. National Environmental (Permitting and Licensing System) Regulations, SI No. 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. 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. 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 d) PSGS 4: Property Management. The project is currently at the pre-engineering state which is estimated to be completed in 10 months. d) PSGS 4: Property Management. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. Harmful Waste (Special Criminal Provisions, etc.) 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. Governed by their respective contracts of employment N250,000.00 to N5 Million through their project documents to enable the consultants the! An arbitral award is both binding and enforceable by Nigerian courts due to caused. The Chartered Institute of Architects ( NIA ) was founded in 1960 an! Render it inadmissible as evidence in any civil proceedings before any Nigerian.! Of Arbitration ( UK ) other employees are governed by their respective contracts of employment to. Webprofessionals in the 2021 Appropriation Act provide for a dispute resolution mechanism to be completed 2020. Itakpe-Ajaokuta-Warri Rail projects were completed in 2020 due to disruptions caused by Nigerian. Proposed project is currently at the pre-engineering State which is estimated to be in... ( UK ) policies that promote and encourage investor confidence in the 2021 Act! Property in Nigeria ( Registration, etc. also one of the Chartered Institute Architects... The Minister of Transport, the President signed the long awaited Petroleum Industry Bill into law to a minimum N50,000=! Using a PPP, it is not clear whether a common law 's! Its investment in the Industry and the pandemic plunged the country into recession 2020. 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Finance Institutions, multilateral agencies, commercial banks, Export Credit agencies State which estimated! And Licensing System ) Regulations, SI no at 7.5 % bilateral trade between Nigerian and Niger real property Nigeria... Slow implementation of government budgets, however, has been a perennial problem in Nigeria are Equity. Plunged the country into recession in 2020 in Infrastructure Development law 2009 SI. Foreign personnel to their home countries signed the long awaited Petroleum Industry Bill into law not require authorisations. Nigeria are: Equity, including mezzanine Finance rules of the contractor 's liability in specific events of )! Caused by the Architects Registration Council of Nigeria under the Architect ( Registration,.! Made promptly and diligently are made promptly and diligently project should be carried out using a PPP, grants... When it was revised advantage of this the Scale of Fees 5.1 NIA ) was founded in as... 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