However, where the owner of the land disposes of it, any gains realised will be liable to capital gains tax at 10%. 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. 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%): WebCONSULTANCY AGREEMENT & PROFESSIONAL FEES SCHEDULE ARCHITECTURAL CONSULTANCY AGREEMENT 7 In the event that the Architect is required to process the application, the Client shall pay the Architect an additional fee based on a time charge as per Schedule 4.11 and expenses based on cost plus 10% in respect of the processing of such The flip side of this is that an estimated loss scheme (liquidated damages) is also built into the contract to subtly compel the contractor to deliver on time and on budget. 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. 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 (. The collapse in oil prices and the pandemic plunged the country into recession in 2020. Advised an international energy group, and a syndicate of lenders, on a USD530 million facility to an indigenous exploration and production company. 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! 19, 2011. 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. 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 Abuja Metro Rail, the Abuja-Kaduna Rail and the 327 kilometre Itakpe-Ajaokuta-Warri Rail projects were completed in 2020. 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. Where possible, promote positive impacts. Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. Webprofessionals in the Built Industry to develop an harmonised scale of fees. This Scale was used for the next 14 years until 1992 when it was revised. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. N60m (estimated project cost) multiplied by a minimum of 7.5% (scale of fees for new projects). 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. Guidelines for the Development of Local Content in the Nigerian Electricity Supply Industry. There are no prescribed methods of payment for construction work in Nigeria, as a result, the payment method to be adopted is usually a subject of negotiation between the parties and can be influenced by the nature of the project. The Harmful Wastes Act criminalises the unlawful carriage, deposit or possession of harmful waste in Nigeria, its territorial waters or exclusive economic zones. Deep-sea port with a railway project connecting Calabar with Port Harcourt and Onne Deep Sea Port. 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. In this revision, the starting band was increased from N250,000.00 to N5 Million. The High Court Rules of the various states, including the Federal Capital Territory Abuja, and other statutes, contain extensive provisions on the jurisdiction of each court in Nigeria. Standard forms of contracts prepared by the Joint Contract Tribunal (JCT). 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. 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. The private sector has also shown an increased appetite for investment in real estate. In most projects, an incentive scheme is built into the contract to reward the contractor if it delivers the project ahead of schedule and on budget. 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). However, by law, parties are unable to cap liability arising from death and personal injury. Generally, a contractor has no obligation to personally perform all the works involved in the project unless expressly obliged under the agreement. 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. Strengthening the sector's institutional framework and increasing transparency. The Constitution also creates the Federal High Court with jurisdiction over specific subject matter. A Q&A guide to construction and projects law in Nigeria. 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. During 2020 and 2021, parties have increasingly sought to declare force majeure events caused by COVID-19. 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. 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. 0. 19, 2009. (. However, it is common for a contractor's obligations to be qualified to the extent that once the contractor has used its best endeavours or has applied the degree of skill and care that could reasonably be expected from a professional of its status, the project company is obliged to accept the completed project. Construction contracts typically include caps on liability. 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%): Cost is a vital element in every development. 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. An arbitral award is both binding and enforceable by Nigerian courts. Webprofessionals in the Built Industry to develop an harmonised scale of fees. Change in law risk. Under these rules. The REA's mandate is to increase electricity access to rural and underserved communities through public and private sector engagement. 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. 40 days after execution of the instrument, where an instrument is liable to stamp duty at a nominal rate. 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 Table of Professional Charges 4.5. 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 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. Other debt funding arrangements include overdraft facility, revolving credit facility, debt capital markets and letters of credit. Professional Bodies in Nigerian Construction Industry. In. 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. 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. Time or Duration Based Fees CHAPTER FIVE: Adjustment of Fees 5.1. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. Arbitration is either ad hoc or institutional. 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. This trend has continued in 2021, and a report published by the World Bank in June 2021 (. The deal was valued at USD414.9 billion. 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 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. 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. Banks and Other Financial Institutions Act 2020 (BOFIA), Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Act (. There is no specific law on how construction disputes should be resolved in 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 insurance must have a value that is at least three times the total annual emoluments of all the employees. The USD11.17 billion Lagos-Calabar coastal standard-gauge line was approved by the Federal Executive Council in August 2021. Proposed construction of a rail line linking Kano, Katsina in Nigeria to Maradi in Niger Republic. Equity funding can be provided by project sponsors, private equity funds, impact investors and individuals. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. 11, 2011. These laws include the US Foreign Corrupt Practices Act and the United Kingdom Bribery Act, 2010. 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 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. Specific laws govern procurement of goods and services in Nigeria. Types of Professional Fees 4.2. 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 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 An EIA must be undertaken where the extent, nature or location of a proposed project or activity is likely to have a significant effect on the environment. 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. Both equity and debt financing will typically be used in the same project usually at a ratio of 70% debt to 30% equity. There is no limit to the number of hours an employee can work in a day. Currently leading the team advising a US company in connection with the development of a 30MW Coal fired power plant in 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. 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. Nigeria is a federation comprised of 36 states and the federal capital territory, Abuja. 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. 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