On 16 August 2021, the President signed the long awaited Petroleum Industry Bill into law. 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. The obligations under the EGASPIN are in addition to any other environmental compliance requirement set out under any other law. 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. Debt providers include Development Finance Institutions, multilateral agencies, commercial banks, Export Credit Agencies. The interest payment on a loan to fund a construction project is an allowable deduction before arriving at the taxable profits. 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. In addition, anything used for the carriage of harmful wastes and any premises or land where it was kept can be forfeited to the FGN. Federal Ministry of Works Contract (variant of the JCT). 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). In 2020, the FGN issued a NGN162.5 billion (about USD393.4 million). Professional bodies are formed as an association of professionals which enhance, control, and regulate the activities of its members. 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. Parties generally have a choice over the applicable arbitration rules. Advised a syndicate of 7 Nigerian banks on a NGN200 billion facility to MTN Nigeria Communications Limited. Typically, the insolvency of the contractor is a termination event under a project document and the client can terminate the project contract and appoint a replacement contractor. Under these rules. 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. 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. Table of Professional Charges 4.5. The Employee Compensation Act 2010 established the Employees' Compensation Fund (Fund) and requires every employer to make a minimum monthly contribution of 1% of its total monthly payroll into the Fund. It is not unusual for contractors to exclude liability for indirect and consequential loss, except for specific items carved out in the contract. Nigeria is signed up to the Paris Agreement which was ratified agreement in 2017. It is uncommon for payment obligations under construction contracts to be secured by land or property. The EGASPIN provides for the following processes: Environmental screening to be carried out during concept selection studies. 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 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 most common forms of dispute resolution in Nigeria are litigation and arbitration. 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. 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. 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 project company is required to obtain expatriate quota approvals for the relevant number of expatriate personnel it intends to employ. Advised New Electricity Development Company Ltd on the acquisition of Ikeja Electricity Distribution PLC. 650,000 barrels-per-day capacity oil refinery being constructed by the Dangote Group in Lagos. There are rules in Nigeria that prohibit corrupt business practices and bribery generally. However, in international projects, the project company is usually wholly owned by the sponsors through a holding company incorporated in a tax-friendly jurisdiction. The contractors also obtain limited time warranties, typically between 12 and 24 months, from the original equipment manufacturers, which they pass on to the project owner. 0. 11, 2011. Due to the increasing cost of key infrastructure projects in the country and dwindling government financing, the government has used public private partnership (PPP) arrangements to finance projects for which the government is not able to secure debt financing, for example the: Highway Development and Management Initiative, a PPP, which is expected to attract over NGN1 trillion in private investment for the development and maintenance of road networks. Act (. Percentage Fee Scales 4.4. There are usually provisions incorporated in the project documents to enable the consultants terminate the contract in the event of the contractor's insolvency. Nigeria LNG Train 7 project is an ongoing expansion of the Nigeria LNG Terminal at Bonny Island, Nigeria. However, these are still subject to performance risks. Other debt funding arrangements include overdraft facility, revolving credit facility, debt capital markets and letters of credit. The two pieces of primary legislation that govern environmental issues in Nigeria are the: Environmental Impact Assessment Act (EIA Act). 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. The transaction, which is valued at USD311.2 million, involved the sale of three power stations by the Rivers State Government to the investor. In addition to these laws, various states have passed laws that regulate environmental issues in their state. 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 (. Arbitration is either ad hoc or institutional. A change in applicable laws and standards necessitates such change. High debt-servicing costs and low tax revenue also left little scope for fiscal spending and new public projects. However, engineering, procurement and construction contracts typically include a payment schedule. Act (. Time or Duration Based Fees CHAPTER FIVE: Adjustment of Fees 5.1. 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 (. 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. 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. 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 From the table above, an architect commissioned to undertake a project with an estimated total cost (ETC) of N 18,200,500 will be entitled to a professional fee of N823,521.25 Nevertheless, the proportion of the above total fee payable to the architect is determined by the amount of work done. The project contract usually contains provisions that require payment to be made for the demobilisation and repatriation of foreign personnel to their home countries. 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. In February 2021, the World Bank Group approved USD500 million support for the FGN for improving the electricity distribution sector and boosting access by improving the performance of Electricity Distribution Companies (DISCOs) through a large-scale metering programme. Cost is a vital element in every development. Advance Fee Fraud and Other Related Offences Act 2006. The relationships between employers, contractors and subcontractors are typically governed by ordinary principles of contract law. 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 MDA sends out an invitation for bids from interested private sector developers. 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. 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. 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. The EFCC Act prohibits anyone from concealing, removing from Nigeria or transferring to nominees, the proceeds of an economic and financial crime, on behalf of another, with the knowledge that such proceeds are as a result of criminal conduct by the principal. Nigeria is a federation comprised of 36 states and the federal capital territory, Abuja. Alu - February 25, 2022. Despite the impact of the pandemic that led to a significant decline of construction activities, the industry was forecast to be one of the lead drivers of the Nigerian economy in 2021. 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. The circumstances described can be expressed to be non-exhaustive in their scope. There are 3 stages of payment. All procuring entities, including MDAs are required to obtain a Certificate of No Objection to Contract Award from the Bureau of Public Procurement before they engage in any procurement process. This Scale was used for the next 14 years until 1992 when it was revised. Cost is a vital element in every development. However, by law, parties are unable to cap liability arising from death and personal injury. These laws include the US Foreign Corrupt Practices Act and the United Kingdom Bribery Act, 2010. The USD11.17 billion Lagos-Calabar coastal standard-gauge line was approved by the Federal Executive Council in August 2021. The most heavily negotiated provisions are those relating to the contractor's liability in specific events of default. Arbitration is usually adopted as the principal means of dispute resolution in construction projects because it is a fairly a quicker means of resolving dispute and gives room for the disputing parties to select subject matter experts as the arbitrators. 40 days after execution of the instrument, where an instrument is liable to stamp duty at a nominal rate. Under the terms of the contract, a sub-contractor can suspend work or terminate a sub-contract on a main contractor becoming insolvent. Alu - February 25, 2022. 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. The Environmental Guidelines and Standards for the Petroleum Industry in Nigeria (EGASPIN). 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 contractual provisions that govern or limit liability include provisions dealing with any of the following: Indemnities on account of losses caused by delay. Section 2(i), part 2 of the Manual makes detailed provisions on fire safety, protection, evacuation, first responders and emergency planning. Many of the solar projects in the northern region also provide distributed energy solutions, on an "off grid" model basis, to clusters, such as markets and housing estates within the region. 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. Where the project involves the provision of utilities, the project company will usually prefer to impose absolute obligations on the contractor (to the effect that the completed project must be fit for a particular purpose and remain fit for a specified period). 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. However, Nigeria currently builds just 2,000 houses per year. The main stages are: Selection of projects in each sector to be implemented on a PPP basis by the relevant ministry, department and agency (MDA) charged with the responsibility of regulating that sector. 2.50% Balance 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%. 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.) 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). Professional Bodies in Nigerian Construction Industry. 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. In addition, each licence issued by the NERC to operators in the power sector, including generation plant owners, require them to comply with Health and Safety standards, regulations and codes. In many cases, the project company is a joint venture entity between a local sponsor and a foreign entity that will provide technical or management services to the project. Implementing clear policies that promote and encourage investor confidence in the sector. Generally, a Nigerian national does not require any authorisations to work in Nigeria. The Abuja Metro Rail, the Abuja-Kaduna Rail and the 327 kilometre Itakpe-Ajaokuta-Warri Rail projects were completed in 2020. Shareholder loans are also common but are typically subordinated to the senior loans. Types of Professional Fees 4.2. The Lagos-Ibadan Standard Gauge rail began commercial operations in 2021. National Environmental (Permitting and Licensing System) Regulations, SI No. A change will enhance efficiency of the project's operations. 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. Demobilisation and repatriation of foreign personnel to their home countries Nigeria currently builds just houses! Most common forms of dispute resolution in Nigeria are the: Environmental screening to be made for the processes..., where an instrument is liable to stamp duty at a nominal rate by the federal capital territory Abuja. 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