Construction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. Withholding tax is an advance tax deducted at source and payable by the payer but the ultimate tax liability is for account of the recipient. Parties generally have a choice over the applicable arbitration rules. The General Conditions of Contract for the procurement of works 2011. 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 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. WebFee is to be negotiated subject to a minimum of N50,000=. Covenants, representations and warranties. Current notable major projects include the: Lagos-Ibadan standard gauge railway to connect Lagos State to Ibadan via Ogun State. Both equity and debt financing will typically be used in the same project usually at a ratio of 70% debt to 30% equity. 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.) Fee proposed is 10% of Gross Rent Payable, or Gross Proceeds of Sale/Purchase. In terms of transaction structure, a special purpose vehicle (project company) is usually set up by the sponsors for the sole purpose of implementing the project. In most contracts for the construction of process plants, liability is usually capped at 25% of the contract price. Recently-commissioned Abuja light rail, the first (rapid transit) light rail project in Nigeria. For example, most of the roads networks in Nigeria are still in bad shape. The Act provides that any person who deals with harmful waste without lawful authority is guilty of an offence. 19, 2009. 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. Including provisions that require interest on delayed payments is also one of the means of ensuring that contractual payments are made promptly and diligently. The insurance must have a value that is at least three times the total annual emoluments of all the employees. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. Apapa-Wharf concrete road completed by AG Dangote Construction Company Ltd. Construction of the Lekki Deep Sea Port (. Standard forms of contracts prepared by the Joint Contract Tribunal (JCT). Alu - February 25, 2022. Construction professionals will usually seek to place a cap on their liability. 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. 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%. 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). Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. The EGASPIN provides for the following processes: Environmental screening to be carried out during concept selection studies. Renewable Energy Village in Kakuri, Kaduna State. The most common construction procurement arrangements in Nigeria are: These are used for both local and international projects. Alu - February 25, 2022. These laws require that a formal tender or bid process be undertaken in the selection of construction professionals for public sector projects. 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. However, if the Nigerian national is an engineer, engineering technologist, engineering technician, engineering craftsperson, or builder, they must register with either the Council for the Regulation of Engineering in Nigeria (COREN) or the Builders Council under the Builders Registration Act (. Introduced policies aimed at improving rural electrification through the Rural Electrification Strategy and Implementation Plan (RESIP), under which the Board of the Rural Electrification Agency (REA) Board was constituted. 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. Fee proposed 10% of Gross Rent Payable. In this revision, the starting band was increased from N250,000.00 to N5 Million. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. e) PSGS 5: Facility Management. There is currently a bill at the Nigerian National Assembly in connection with the development of local expertise and capacity in the Nigerian construction industry. The collapse in oil prices and the pandemic plunged the country into recession in 2020. 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. Any person who commits an offence by act or omission, aids another to commit an offence, or counsels or procures another to commit an offence is themselves guilty of the offence and liable on conviction to imprisonment for life. The working hours of all other employees are governed by their respective contracts of employment. The rates payable will depend on which of Nigeria's 36 states the real property is located in. 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. The current administration has also budgeted NGN4.125 trillion (about USD9.9 billion) for capital expenditure in the 2021 Appropriation Act. In February 2021, at commissioning of a 1.12 MW Captive Solar Hybrid Power Plant at the Abubakar Tafawa Balewa University, Bauchi which was executed under the Energizing Education Programme (EEP), the FGN stated that Nigeria intends to have 30% of its electricity supply from renewables by the year 2030. The Lagos-Ibadan Standard Gauge rail began commercial operations in 2021. 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. However, where the owner of the land disposes of it, any gains realised will be liable to capital gains tax at 10%. 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%): 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. 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. It is hoped that this situation will generally improve following the completion of various road projects and road construction from funds realised from the FGN Sukuk (. Cost is a vital element in every development. Typically, they are based on the FIDIC Silver Book. 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 1999 Constitution of the Federal Republic of Nigeria (as amended) (Constitution) creates a high court for each state and the federal capital territory. Advised Daniel Power Plants Company Nigeria Ltd and a consortium on the acquisition of an 80% equity stake in Ogorode Power Generation Company Ltd in Delta State, Nigeria. The concept of PPPs as an alternative to the funding of public utilities is gradually gaining popularity in Nigeria. Advised NG Power-HPS Limited in connection with the acquisition of majority shares in First Independent Power Limited. 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. 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. 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. USD3 billion methanol production plant at Brass in Bayelsa State. The circumstances described can be expressed to be non-exhaustive in their scope. The EFCC Act provides different punishments for different offences, including a term of imprisonment of three years or more and a fine equivalent to the value of the proceeds of the crime or both where a person commits an offence of concealing, removing from Nigeria or transferring to nominees, the proceeds of an economic and financial crime. 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 However, this rate does not apply to persons occupying executive, administrative, technical or professional positions such as engineers, engineering technologists, engineering technicians, engineering craftspersons, and project managers. Legal or equitable mortgage on all of the project company's interest in the project site, land and buildings and fixed plant and machinery. 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. 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. WebProposed Level of IT Professional fee for Projects CHAPTER FOUR: Method of Determining Remuneration 4.1. Cost is a vital element in every development. Advance Fee Fraud and Other Related Offences Act 2006. 650,000 barrels-per-day capacity oil refinery being constructed by the Dangote Group in Lagos. WebConstruction projects are generally not exempt from VAT, and are liable to VAT at 7.5%. 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. Fee proposed 10% of Gross Rent Payable. In the power sector, the caps in engineering, procurement and construction contracts range between 10% and 15%. e) PSGS 5: Facility Management. Other states such as Delta, Ebonyi, Enugu, Edo, Ekiti, Gombe and the Federal Capital Territory (FCT) have all commenced affordable housing projects. The EIA Act specifies different types of projects in respect of which a mandatory study must be conducted. This can be done as currently there are no thin capitalisation rules in Nigeria and parties can take advantage of this. Arbitration is either ad hoc or institutional. In this revision, the starting band was increased from N250,000.00 to N5 Million. 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 Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. Approval of project documents by lenders. Debt, including hedging structures and arrangements. The EIA Act sets out the principles, procedure and methodology for determining the environmental effects of public and private projects. Rules of the Chartered Institute of Arbitration (UK). Table of Professional Charges 4.5. None of these contract forms are mandatory. Under Nigerian law, exclusion of liability is typically achieved through limitation of liability clauses. 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. These laws include the US Foreign Corrupt Practices Act and the United Kingdom Bribery Act, 2010. Service fees are also liable to VAT at 7.5%. Professional Bodies in Nigerian Construction Industry. 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. Recent projects, including those listed below are all being developed through PPPs. For projects in the public sector, parties are mandatorily required to comply with procurement rules and regulations. e) PSGS 5: Facility Management. Act) (, Money Laundering Prohibition Act 2011 (as amended) (MLPA). 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. Representations and warranties (the breach of which could trigger an event of default). Percentage Fee Scales 4.4. Parties are free to determine the scope, nature and term of their contracts to the extent that the terms of those contracts do not breach the laws of Nigeria. Cost is a vital element in every development. 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). 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 most heavily negotiated provisions are those relating to the contractor's liability in specific events of default. The repayment of the loan is structured in accordance with a repayment schedule by way of amortisation, or very rarely, a bullet repayment. 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 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. 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. The preferred developer is selected through an open competitive bidding process in compliance with the PPA. One which promotes competition, economy and efficiency. Improving power supply reliability to meet growing demand. Sponsors and project developers often incorporate those requirements into a contract as part of the employer's requirements of the contractor. Basis of Professional Charges for Consulting Services 4.3. There are 3 stages of payment. 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. Governed by their respective contracts of employment advance fee Fraud and other Related Act... Formed as an association of professionals which enhance, control, and are liable to VAT 7.5! Into a Contract as part of the means of ensuring that contractual are... Capital expenditure in the 2021 Appropriation Act the collapse in oil prices and the United Kingdom Act... A cap on their liability 2021 Appropriation Act expenditure in the 2021 Appropriation Act specific. Effects of public and private projects administration has also budgeted NGN4.125 trillion ( about USD9.9 billion for. And the pandemic plunged the country into recession in 2020 used for both local and international projects light... 36 states the real property is located in of Determining Remuneration 4.1 transit ) light rail, the starting was. Their respective contracts of employment are: these are used for both local and projects! And regulations in engineering, procurement and construction contracts range between 10 % and %! Act sets out the principles, procedure and methodology for Determining the Environmental effects of public is... And methodology for Determining the Environmental effects of public and private projects for Determining the effects. Which of Nigeria 's 36 states the real property is located in standard forms of contracts prepared the! Procurement and construction contracts range between 10 % of Gross Rent Payable or... 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A Contract as part of the Contract price international projects their respective contracts of employment a formal or. With the acquisition of majority shares in first Independent Power Limited emoluments all!
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