Nigeria - Country Commercial Guide
Franchise Sector

This is a best prospect industry sector for this country.  Includes a market overview and trade data.

Last published date: 2021-10-13

Franchising in Nigeria is a well-utilized model for business expansion, used by both multinational and local businesses in Nigeria. The franchise sector in Nigeria has evolved from not being understood or utilized.  It is now being employed across many markets.  The country has two main bodies overseeing franchise operations in Nigeria, the National Office for Technology Acquisition and Promotion (NOTAP) and Nigerian International Franchise Association (

There is currently no specific law in Nigeria which regulating the sale franchises. However, the national office for Technology Acquisition and promotion Act, Chapter N62, Laws of the Federation of Nigeria 2004 (NOTAP Act) regulates the transfer of foreign technology to Nigeria.

A franchise arrangement involves the transfer of technology and thus is regulated by the provision of the NOTAP Act.  It is required by the NOTAP Act that all agreements for the transfer of technology between a foreign transferor and a Nigerian transferee must be registered with NOTAP.

Section 4 of the NOTAP Act states that such agreements are to be registered if they are regarding:

  • Use of trademarks
  • Use of patented inventions
  • Supply of technical expertise in the form of technical assistance of any description whatsoever
  • Supply of detailed engineering drawings
  • Supply of machinery and plant
  • Provision of operating staff, managerial assistance, and the training of personnel.

The NOTAP stipulates that an agreement for the transfer of technology must not exceed a term of 10 years. In practice, however, NOTAP usually approves a franchise agreement for a period of three years and upon its expiration, it needs to be renewed for further periods of three years. The NOTAP also has the power to refuse the registration of a franchise agreement which contains provisions that impose obligation on the franchisee to acquire equipment, tools, parts, or raw materials exclusively from the franchisor or any other person or given source.

Based on a survey of some franchise operations in Nigeria, four main franchising models are used in the country:

  • Trade name franchise
  • Business format franchise
  • Master franchising
  • Product franchising

According to the United Nations Population Fund (UNFPA), Nigeria’s population is over 210 million (2021) making the country the most populous in Africa. While the large population is expected to accelerate the growth of franchises in the country, some economic factors such as the growing inflation rates which are currently at 15.97% (July 2021) has increased the prices of goods and services and reduced the consumer purchasing power.

In January 2021, the Consumer Price Index (CPI) in Nigeria stood at 361.2. Compared to January 2020, the CPI increased by 16.5%. This means that the inflation has steadily been rising. In fact, Nigeria ranks as one of the countries with the highest inflation rate worldwide. Loss of income and reduction in salaries of individuals as a fallout of COVID-19 has also resulted in reduced income and purchasing power. This effectively reduces the market size for products priced above the reach. The low purchasing power of the majority manifests in the high price sensitivity of consumers.  Franchises looking to come into the market must be mindful of this price sensitivity in developing their business model, pricing their products, and segmenting their market.

The cost of doing business for franchises is also on the rise, especially those dependent on imported components for their business. The wide fluctuation of naira is at an all-time high of:

  • ₦ 410.11/409.11 for a $1 (sell/buy rate) Central bank of Nigeria official
  • Current black market of approximately ₦ 505/500 for a $1(sell/buy rate)

This has resulted in higher costs for franchises which is likely to be passed on to the consumers in form of higher prices for goods and services.  Additionally, in February 2020, the value-added tax rate was increased from 5% to 7.5%, resulting in increased cost of goods and services for franchises.

U.S. franchises operating in the country have adjusted to the economic situation in the country, which is declining due to fluctuations in global oil prices, the major revenue generator for GON. For example, Domino’s Pizza has created a cheaper product priced at $1.44 or 550 naira, to attract more customers with lower purchasing power. According to the National Bureau of Statistics (NBS), the Nigerian economy contracted by 1.92% in 2020 due to the combined effects of low oil prices and COVID-19 pandemic leading to the country into recession for the second time since 2016. However, the GON through the Economic Sustainability Plan (ESC) has been taking steps to manage this contraction rate by introducing an economic stimulus package of 2.3 trillion naira ($5.6 billion). The expected economic contraction may influence U.S. franchises in the country as revenues may reduce due to lower spending by the populace, which will negatively affect expansion plans of the businesses. In addition to these challenges, foreign exchange risks in the country continues to be a challenge as the country’s foreign exchange rate has lost over 100% of its value in the past four years. For example, Krispy Kreme became operational in 2018 when the exchange rate was 360 naira to $1; however, the current official exchange rate is 410 naira to $1, representing a 12% devaluation rate. This would influence royalty payments, which are paid in dollars.

The availability of credit and interest rates also affect the growth of franchises in Nigeria, as credit helps customers augment or facilitate the purchase of items. The current interest rate as of July 2021 is 11.5% down from 13.5% in 2019, and this affects the cost of financing via debt as the loan repayment is structured to accommodate the current high interest rates which in turn reduce the consumer purchasing power.

Due to COVID-19, the government of Nigeria (GON) disbursed funds worth 1 trillion naira ($2.43 billion) in loans via financial institutions and an additional 100 billion naira intervention fund in healthcare loans to pharmaceutical companies and healthcare practitioners intending to build capacity in order to boost local manufacturing and production across critical sectors. These sectors are reportedly flourishing despite the COVID-19 pandemic and include the health sector, food processing, manufacturing, and FMCGs.

Top Franchises in Nigeria

Quick service restaurants (QSRs) and fast-food operations are the top franchises in Nigeria based on volume. South Africa and U.S. companies account for the highest owners of franchise operations in Nigeria. Some top franchise operations include:

  • Dominoes (U.S.)
  • Johnny Rockets (U.S.)
  • Kentucky Fried Chicken (U.S.)
  • Krispy Kreme (U.S.)
  • Pizza Hut (U.S.)
  • The UPS Store (U.S.)
  • Mr. Price (South Africa)
  • SPAR (South Africa)
  • Ocean’s Basket (South Africa)
  • Shoprite (South Africa)

In April 2021, U.S. restaurant brand Burger King formally announced its entry into Nigeria. The executives of Restaurant Brands International (RBI), the parent company of Burger King and Allied Foods and Confectionary Services (AlliedFCS) Nigeria Limited, franchisee of Burger King in Nigeria, concurrently confirmed this news in the U.S. and Nigeria with the  first store expected to open in Q4 2021.

45% of the U.S. franchise operators do business in the Food and confectionary space, followed by health and wellbeing, accounting for 18%, while apparel, construction, consulting and technical services account for 9% of total franchise operators, respectively.

Nigeria - Distribution of Sampled US Franchises in NIgeria in 2018
Nigeria - Distribution of Sampled US Franchises in NIgeria in 2018

Challenges in the Franchise Sector

U.S. franchises continue to face market-based challenges related to poor economic conditions in the country. Some of these challenges include:

  • Foreign exchange risk
  • Low level of infrastructure
  • Declining consumer spending power
  • Ban on dairy products

Foreign Exchange Risk: The Nigerian naira has continued to weaken against the dollar and the cost to businesses is high. Businesses that have high naira exposure and purchase raw materials in foreign currencies have witnessed a significant increase in costs while revenues have declined or at best remained flat.  Businesses also have difficulty getting access to foreign currency for certain purposes.  Innovative businesses have created products and adjusted their business models to fit into this new reality.

Low Level of Infrastructure: In 2020, the International Monetary Fund put the ratio of Nigeria’s infrastructure stock to GDP at about 25% against the World Bank’s recommendation of 70%. The country’s infrastructure deficit cuts across several segments, with power and roads the most salient. The country produces 141kwH of electricity for its 200+ million people. The lack of stable electricity in the country has resulted in widespread self-generation by individuals and businesses using electric generators. It is estimated that power accounts for over 60% of the costs of doing business in Nigeria.

Declining consumer spending power: In 2020, SBM intelligence conducted a research on the income distribution and spending pattern of 1633 respondents across major cities in Nigeria. The result of the company’s research showed that 63% of respondents had no disposable income after food. The company concluded that the effective market size for businesses outside of the food sector was about 37% of the population, or about 74 million of over 200 million people. This poses a risk to the revenue of U.S. companies that may have forecasted revenue using higher potential consumer numbers than the current effective market size based on economic realities.

Ban on Dairy Products: In July 2019, the Central Bank of Nigeria (CBN) banned commercial banks and other authorized dealers from accepting import declarations for the importation of milk and other dairy products, effectively banning the importation of these products. The CBN noted that $1.2-$1.5 billion was being spent annually importing milk, hence this decision would, in theory, stimulate the local production of milk and growth of the local dairy sector. Foreign companies requiring dairy products as part of their raw materials were advised to invest in the local dairy sector. By February 2020, the CBN announced that six companies who had keyed into the bank’s backward integration program for milk production had been exempted from the ban.  Two American companies were included in the six. Other players in the industry requiring dairy products now engage with these companies for purchase of milk and other dairy products.


Based on understandings of the market and conversations with industry stakeholders, opportunities for market share increase, acquisitions, and business scope expansion exists for U.S. franchises in the country. Due to the current state of the economy, businesses without the capacity to survive will reduce their presence (e.g., Mr. Price, a clothing retailer, announced they will be leaving Nigeria), creating gaps in the market. Some of the sectors where significant opportunities exist for franchises in Nigeria include food, cinema, transportation, logistics, medical health care, educational services, interior design, mobile devices, and beauty care.

Following sharp output contractions in the second and third quarter, GDP growth turned positive in Q4 2020 and growth reached 0.5% in Q1 2021. The IMF has estimated a GDP growth of approximately 2.5% for the Nigerian economy in 2021.  They also predict a deceleration of inflation rates in the second half of the year to reach about 15.5%, following the removal of border controls and the elimination of base effects from elevated food price levels. Therefore, an economic upturn is still possible after COVID, creating a better environment for those who enter or remain in the market.

GON is taking steps to improve the business environment, and this will be beneficial to U.S. Franchises. Some of these steps include:

  • Through the CBN, GON is enacting regulations which help improve the availability and accessibility of credit facilities
  • Provision of the NOTAP Act, which regulates the transfer of foreign technology to Nigeria. This thereby regulates any franchise agreement involving the transfer of technology
  • Facilitation of business incorporation and registration of non-nationals for business purposes. Business registration has now been digitized and can be carried out on the Corporate Affairs Commission (CAC) website
  • Provision of seamless trademark process, with trademark privileges lasting between 7 to 14 years

For more sector information, e-mail:  Chidinma Akaniro, Commercial Specialist, U.S. Commercial Service, Nigeria, at