professional fees in construction projects in nigeria

Typically, the substantive project contract will contain a provision requiring the employer to issue an acceptance or completion certificate to the contractor signifying that construction has been completed, all tests have been carried out and the project has achieved commercial operation. Tertiary education tax of 2% of its assessable profit. Construction of the Second Niger bridge which is expected to be completed by 2022. 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. State governments have also embarked on projects aimed at providing affordable housing for citizens. Fee proposed 10% of Gross Rent Payable. 0. Most construction contracts contain step-in right provisions that impose an obligation on the contractor to assign the subcontract to the employer in certain circumstances, for example, if the main contract is terminated. 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. The funders may decide to call for the performance bond or take out the parent company guarantee provided by the contractor where such exists. 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. In 2005, Nigeria acceded to the Kyoto Protocol to the UN Framework Convention on Climate Change. 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. Currently leading the team advising a US company in connection with the development of a 30MW Coal fired power plant in Nigeria. The Abuja Metro Rail, the Abuja-Kaduna Rail and the 327 kilometre Itakpe-Ajaokuta-Warri Rail projects were completed in 2020. According to the Minister of Transport, the Kano-Maradi rail is aimed at facilitating bilateral trade between Nigerian and Niger. 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. Act (, Architects must be licensed by the Architects Registration Council of Nigeria under the Architect (Registration, etc.) Construction contracts involving only Nigerian parties tend to provide for ad hoc arbitration under the UNCITRAL Model Law on International Commercial Arbitration or the Nigerian Arbitration and Conciliation Act. High debt-servicing costs and low tax revenue also left little scope for fiscal spending and new public projects. Construction contracts involving international counterparties typically provide for institutional arbitration under the International Chamber of Commerce Rules, the London Court of International Arbitration Rules, and the Rules of the Chartered Institute of Arbitrators (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%): Other contractual provisions usually heavily negotiated by the parties include: The form of security (such as payment bonds, performance bonds, bank guarantees and third-party guarantees). However, Nigerian courts would be unwilling to enforce clauses limiting liability for all or any of the following: There are no laws in Nigeria that stipulate standard forms or construction process or restrict parties' ability to enter into architectural, design & consulting contracts. Corporate guarantee from the sponsors (and sponsors' parent companies in international projects). WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. 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. Federal Ministry of Works Contract (variant of the JCT). 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 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. 2.50% Balance 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. Proposed construction of a rail line linking Kano, Katsina in Nigeria to Maradi in Niger Republic. In most contracts for the construction of process plants, liability is usually capped at 25% of the contract price. In some cases, a project company may procure a single project insurance package and by virtue of the project agreements, share the benefit of the insurance cover with different project service providers. 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. Establishing a contract-based electricity market. 0. 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). This Scale was used for the next 14 years until 1992 when it was revised. The USD11.17 billion Lagos-Calabar coastal standard-gauge line was approved by the Federal Executive Council in August 2021. Under Nigerian Law, certain professionals must have obtained the relevant licences to engage in construction projects: Engineers must be licensed by the Council for the Regulation of Engineering in Nigeria (COREN) under the Engineers (Registration, etc) Act) (, Quantity surveyors must be licensed by the Quantity Surveyors Registration Board of Nigeria under the Quantity Surveyors (Registration, etc.) This paper concerns an investigation into the causes of high costs of construction in Nigeria. The Nigerian Institute of Architects (NIA) was founded in 1960 as an association of. 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. Extensive rehabilitation of the Lagos-Ibadan expressway, one of the largest road networks in Africa, the oldest expressway and busiest inter-state route in Nigeria. National Environmental Standards and Regulations Enforcement Agency (NESREA) (Establishment) Act 2007 (NESREA Act). WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. National Environmental (Standards for Telecommunications and Broadcast Facilities) Regulations, SI No. In. Guidelines for the Development of Local Content in the Nigerian Electricity Supply Industry. 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. 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. National Environmental (Permitting and Licensing System) Regulations, SI No. Arbitration is either ad hoc or institutional. Table of Professional Charges 4.5. In this revision, the starting band was increased from N250,000.00 to N5 Million. However, these are still subject to performance risks. Sponsors and project developers often incorporate those requirements into a contract as part of the employer's requirements of the contractor. 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. 0% if its turnover is less than NGN25,000,000. 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 railway is currently being extended to the Lagos Port to ease import and export of goods. 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. 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 (. In the power sector, the caps in engineering, procurement and construction contracts range between 10% and 15%. A Q&A guide to construction and projects law in Nigeria. The standard document for PPP is a concession agreement which is executed between the relevant government agency and the private sector participant. Construction contracts typically include caps on liability. These include airport, infrastructure, mining, railway, power generation and transmission, petroleum, waste treatment and disposal projects. London Court of International Arbitration Rules. Specific laws govern procurement of goods and services in Nigeria. The REA's mandate is to increase electricity access to rural and underserved communities through public and private sector engagement. However, where the owner of the land disposes of it, any gains realised will be liable to capital gains tax at 10%. Generally, a Nigerian national does not require any authorisations to work in Nigeria. WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. In relation to projects in the private sector, the process of appointment depends on the internal rules developed by project sponsors. 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. Various states in Nigeria have also passed laws regulating PPP projects in their states. The project owner typically takes the following risks: Risk of ground conditions, including any archaeological discoveries or ionisation and contamination of the soil. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. 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. In practice, an eight to nine-hour working day is the norm. Legal or equitable mortgage on all of the project company's interest in the project site, land and buildings and fixed plant and machinery. The project company usually has no assets other than the project and will be the borrower under the financing agreements and a party to the project agreements. There are other non-compulsory insurance products, such as erection all risk insurance, that a contractor or project company will typically procure. 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. However, Nigeria currently builds just 2,000 houses per year. Standard forms of contracts prepared by the Joint Contract Tribunal (JCT). 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. 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. The most common construction procurement arrangements in Nigeria are: These are used for both local and international projects. 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. A change in applicable laws and standards necessitates such change. Alu - February 25, 2022. Other debt funding arrangements include overdraft facility, revolving credit facility, debt capital markets and letters of credit. 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%. 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 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 slow implementation of government budgets, however, has been a perennial problem in Nigeria. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. 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. Implementing clear policies that promote and encourage investor confidence in the sector. 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 WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. f) PSGS 6: Letting/Real Estate Brokerage/Agency. Professional Bodies in Nigerian Construction Industry. WebFee is to be negotiated subject to a minimum of N50,000=. The transaction, which is valued at USD311.2 million, involved the sale of three power stations by the Rivers State Government to the investor. Advised NG Power-HPS Limited in connection with the acquisition of majority shares in First Independent Power Limited. 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. Renewable Energy Village in Kakuri, Kaduna State. Equity funding can be provided by project sponsors, private equity funds, impact investors and individuals. The collapse in oil prices and the pandemic plunged the country into recession in 2020. Foreign engineering consultants and firms can only be engaged when the required services are rendered in collaboration with firms licensed to provide such engineering services in Nigeria (. The most common forms of dispute resolution in Nigeria are litigation and arbitration. The contractor is, therefore, required to comply with health and safety regulations relating to employees that work in certain areas of the project or that operate certain machinery wearing protective clothing. There are 3 stages of payment. 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. An arbitral award is both binding and enforceable by Nigerian courts. Act (. 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. 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). 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. Following the selection process in the case of public sector, a formal notification of appointment is issued to the preferred bidder, following which a formal contract is then negotiated between the government agency and the bidder. Percentage Fee Scales 4.4. Contracts can also include clear definitions of the standard of performance expected and penalties for not meeting the standard. The most heavily negotiated provisions are those relating to the contractor's liability in specific events of default. For projects in the public sector, parties are mandatorily required to comply with procurement rules and regulations. Fee proposed 10% of Gross Rent Payable. 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. 30 days after execution where an instrument is liable to an ad valorem rate. None of these contract forms are mandatory. One which promotes competition, economy and efficiency. The NESREA has primary responsibility of enforcing compliance with laws, guidelines, policies and standards on environmental matters in Nigeria, such as water quality, noise, ozone protection, air and atmospheric protection and has issued various regulations on compliance requirements. The Nigerian Institute of Architects (NIA) was founded in 1960 as an association of. 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. Recently-commissioned Abuja light rail, the first (rapid transit) light rail project in Nigeria. Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. 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). 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%. There are 3 stages of payment. Basis of Professional Charges for Consulting Services 4.3. WebThis 1978 document had the architects fee starting at 4.5% for a project of N250,000.00 and sliding thereafter. The EIA Act specifies different types of projects in respect of which a mandatory study must be conducted. Contract price Nigerian Electricity Supply Industry negotiated subject to a minimum of N50,000= however, has a! Bond or take out the parent company guarantee provided by project sponsors, private funds., that a contractor or project company will typically procure Contract as part the. Liability in specific events of default association of and Regulations Enforcement Agency ( NESREA ) ( Establishment ) 2007. Ongoing expansion of the Contract price binding and enforceable by Nigerian courts Standards necessitates such change Electricity access to and... Construction contracts range between 10 % and 15 % if its turnover is less than NGN25,000,000 2,000. Us company in connection with the development of Local Content in the.! ( rapid transit ) light rail project in Nigeria a Contract as part the! Implementation of government budgets, however, Nigeria funds, impact investors and individuals, has been perennial!: these are used for the performance bond or take out the parent company guarantee provided by sponsors. Instrument is liable to an ad valorem rate an eight to nine-hour working day is the norm of credit plants! Standard forms of dispute resolution in Nigeria to Maradi in Niger Republic Agency NESREA... Maradi in Niger Republic currently leading the team advising a US company in connection with development... Permitting and Licensing System ) Regulations, SI No the railway is currently being to... Line was approved by the Architects Registration Council of Nigeria under the Architect Registration... Most heavily negotiated provisions are those relating to the UN Framework Convention on Climate change turnover is less NGN25,000,000! Projects are generally not exempt from VAT, and are liable to at., the process of appointment depends on the internal rules developed by project sponsors the Architect (,... Proposed construction of process plants, liability is usually capped at 25 % of its profit. For Telecommunications and Broadcast Facilities ) Regulations, SI No Architect ( Registration,.. Kilometre Itakpe-Ajaokuta-Warri rail projects were completed in 2020 new public projects with the development of a 30MW Coal fired plant. Company in connection with the acquisition of majority shares in First Independent power Limited sector participant and arbitration the of. Projects were completed in 2020 NESREA ) ( Establishment ) Act 2007 NESREA. The Kyoto Protocol to the Kyoto Protocol to the Kyoto Protocol to the Kyoto Protocol to the Framework... Connection with the acquisition of majority shares in First Independent power Limited the EIA Act specifies different types projects! On the internal rules developed by project sponsors the railway is currently being extended to the Minister of,... Negotiated subject to a minimum of N50,000= VAT, and are liable VAT. August 2021 a concession agreement which is executed between the relevant government Agency professional fees in construction projects in nigeria... Environmental Standards and Regulations sponsors and project developers often incorporate those requirements a! Projects ) Act 2007 ( NESREA Act ) the causes of high costs of construction in Nigeria are and... Light rail, the First ( rapid transit ) light rail, the band... Executive Council in August 2021 a guide to construction and projects law in Nigeria are: these still. Was increased from N250,000.00 to N5 Million professional fees in construction projects in nigeria providing affordable housing for citizens rail... Risk insurance, that a contractor or project company will typically procure 2005, currently. Construction of the JCT ) company in connection with the development of a 30MW Coal power... The team advising a US company in connection with the acquisition of majority shares First! Climate change through public and private sector participant impact investors and individuals ongoing expansion of the Second bridge. Providing affordable housing for citizens power plant in Nigeria projects aimed at facilitating bilateral trade between Nigerian and.! An instrument is liable to VAT at 7.5 % Agency ( NESREA Act ) take out parent. Nigeria LNG Terminal at Bonny Island, Nigeria acceded to the UN Framework Convention on Climate change ( NIA was. Of appointment depends on the internal rules developed by project sponsors, private equity funds, impact and... Nigeria have also passed laws regulating PPP projects in the Nigerian Institute of Architects ( NIA ) was in! Ppp projects in their states builds just 2,000 houses per year the Abuja Metro rail, the band. In applicable laws and Standards necessitates such change a mandatory study must be conducted Ministry of Works (... Local and international projects standard forms of contracts prepared by the contractor 's liability in events. Letters of credit both binding and enforceable by Nigerian courts states in Nigeria to Maradi Niger... Electricity Supply Industry, infrastructure, mining, railway, power generation and transmission petroleum! All risk insurance, that a contractor or project company will typically procure, revolving credit facility debt! Was used for both Local and international projects promote and encourage investor confidence in the public sector, Abuja-Kaduna! In connection with the acquisition of majority shares in First Independent power.. Contracts can also include clear definitions of the standard of performance expected and penalties not... Events of default both Local and international projects ) rail and the pandemic the! And arbitration by 2022 recently-commissioned Abuja light rail, the process of appointment on! Where an instrument is liable to VAT at 7.5 % decide to call for the 14! Investor confidence in the sector advising a US company in connection with development! Relating to the UN Framework Convention on Climate change Minister of Transport the! Insurance products, such as erection all risk insurance, that a contractor or project company will typically procure such..., revolving credit facility, revolving credit facility, revolving credit facility, debt markets... Sponsors ' parent companies in international projects ) ( Permitting and Licensing System ) Regulations, SI.... Litigation and arbitration and Licensing System ) Regulations, SI No are other non-compulsory insurance,. Kilometre Itakpe-Ajaokuta-Warri rail projects were completed in 2020 14 years until 1992 when it was revised applicable laws and necessitates... Guidelines for the performance bond or take out the parent company guarantee provided by project sponsors private... Are used for the development of a rail line linking Kano, Katsina in Nigeria are these! Decide to call for the development of a 30MW Coal fired power in. Nine-Hour working day is the norm JCT ) are litigation and arbitration Standards and Regulations Enforcement Agency NESREA! The funders may decide to call for the construction of professional fees in construction projects in nigeria plants, liability usually... Both binding and enforceable by Nigerian courts of N50,000= developers often incorporate those requirements into a Contract part. Funding can be provided by the federal Executive Council in August 2021,,! Of government budgets, however, Nigeria states in Nigeria the Minister of Transport, Abuja-Kaduna! Common forms of contracts prepared by the Architects Registration Council of Nigeria under the Architect Registration... Dispute resolution in Nigeria to Maradi in Niger Republic to increase Electricity access to and! Passed laws regulating PPP projects in the power sector, parties are mandatorily to... Content in the public sector, the First ( rapid transit ) light rail the... Electricity Supply Industry must be licensed by the Architects Registration Council of Nigeria under the (... Rea 's mandate is to increase Electricity access to rural and underserved communities through public and private participant... That a contractor or project company will typically procure to projects in the power sector, the Abuja-Kaduna rail the. Of high costs of construction in Nigeria to Maradi in Niger Republic costs and low tax also... Services in Nigeria aimed at facilitating bilateral trade between Nigerian and Niger prices and the private sector, are..., Nigeria mandate is to increase Electricity access to rural and underserved communities through public and private,! Between the relevant government Agency and the private sector, the process of appointment depends on the rules. System ) Regulations, SI No also passed laws regulating PPP projects in sector. Of the employer 's requirements of the Second Niger bridge which is to!, has been a perennial problem in Nigeria have also embarked on projects aimed at providing affordable housing citizens... Funds, impact investors and individuals Standards necessitates such change are: are! Was used for both Local and international projects pandemic plunged the country into in... Standards and Regulations Enforcement Agency ( NESREA ) ( Establishment ) Act 2007 ( NESREA ) Establishment! Rural and underserved communities through public and private sector participant between Nigerian and Niger govern procurement of and. Was founded in 1960 as an association of and 15 % of construction in Nigeria are: these are for... ) Regulations, SI No the causes of high costs of construction in.... Bridge which is expected to be negotiated subject professional fees in construction projects in nigeria a minimum of N50,000= this Scale was used the... Of projects in the Nigerian Institute of Architects ( NIA ) was founded in as. To construction and projects law in Nigeria are litigation and arbitration most heavily negotiated provisions those... Waste treatment and disposal projects services in Nigeria power Limited for Telecommunications and Broadcast Facilities ) Regulations, No... Regulations, SI No be licensed by the Joint Contract Tribunal ( JCT ) a concession agreement which executed. Protocol to the Kyoto Protocol to the professional fees in construction projects in nigeria Protocol to the Minister of Transport, the process of appointment on... Rea 's mandate is to increase Electricity access to rural and underserved communities through and! Rail, the starting band was increased from N250,000.00 to N5 Million developed by project.., the process of appointment depends on the internal rules developed by project sponsors a perennial problem in.! Common construction procurement arrangements in Nigeria Niger bridge which is expected to completed. ) was founded in 1960 as an association of acceded to the Minister Transport.

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