Nigeria - Country Commercial Guide
Franchise Sector
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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.

In March 2022, a bill to regulate the Nigeria’s franchising sector passed second reading at the Nigerian Senate. The bill tagged “Franchising (Establishment) Bill (SB 969)”, establishes a framework for the regulation of franchising in Nigeria and governs the relationship between franchisors and franchisees. Provisions in SB 969 establish the National Office for Technology Acquisition and Promotion (NOTAP) as responsible for bill implementation. All franchise disclosure documents must be registered with NOTAP to be considered valid. If signed, the bill will apply to new or renewed franchise agreements irrespective of whether the agreement is with a Nigerian or foreign franchisor. Some key components of the current bill include requirements of a franchise agreement, franchisor’s disclosure obligations, pre-franchise agreement fees and opt-out period, freedom of association, and local content requirements.

Absent the legislation (pending as of September 2022), there is no specific law in Nigeria regulating the sale of 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.  This framework has been the de facto regulation for franchises. 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 Act 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 franchise operations in Nigeria, four main franchising models are used in the country:

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

While Nigeria’s large population is expected to accelerate the growth of franchises in the country, some economic factors may stunt this growth, such as the growing inflation rates which are at 17.71% (May 2022) has increased the prices of goods and services and reduced the consumer purchasing power.

In May 2022, the consumer price index (CPI) in Nigeria stood at 447.2. This is a year-over-year increase of 17.7%, indicating steadily rising inflation. 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 the pandemic resulted in reduced income and purchasing power. 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 gap between official and parallel market foreign exchange rates has significantly widened over the last half decade. 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. The value added tax rate remains at 7.5% and this continues to burden individuals and businesses.

U.S. franchises operating in the country have adjusted to the economic situation in the country. For example, Domino’s Pizza has created a cheaper product priced at $1.44 (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. In addition to these macroeconomic challenges, foreign exchange risks in the country continue as the naira value decreased 100% since 2018 vis-a-vis the dollar.

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 interest rate at the year-end 2022 was 16.5%. A significant increase from 11.5% at the end of 2021, affecting the cost of financing via debt.

Top Franchises in Nigeria

Quick service restaurants (QSRs) and fast-food operations are the top franchises in Nigeria based on volume, constituting about 45% of the franchises. South Africa, and U.S. companies account for the highest owners of franchise operations in Nigeria. Some top franchise operations include:

  • Dominos (U.S.)
  • Cold Stone Creamery (U.S.)
  • Kentucky Fried Chicken (U.S.)
  • Krispy Kreme (U.S.)
  • Pizza Hut (U.S.)
  • The UPS Store (U.S.)
  • SPAR (Netherlands)

In November 2021, U.S. restaurant brand Burger King formally inaugurated its first location in Nigeria.

Challenges in the Franchise Sector

U.S. franchises continue to face market-based and policy 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 seen a significant increase in costs while revenues have declined or remained flat. Businesses also have difficulty getting access to foreign currency.

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 prominent. In 2021, however, the Central Bank of Nigeria established the Infrastructure Corporation (InfraCorp) to bridge the infrastructure gap. In partnership with the African Finance Corporation (AFC) and the Nigerian Sovereign Investment Authority (NSIA) a seed investment of $2.1 billion (1 trillion naira) was raised. The country still faces electricity challenges, recording in 2021, 147kwH per capita electricity generation for its over 200 million people, a slight increase from 141kwH produced in the previous year.

Declining Consumer Spending Power: In 2020, SBM Intelligence conducted a search on the income distribution and spending pattern of 1,633 respondents across major cities in Nigeria. The result of the company’s research showed that 63% of respondents had no disposable income after food. 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 theoretically 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 participants 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. 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. The government of Nigeria 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, the Nigerian government is enacting regulations which help improve the availability and accessibility of credit facilities
  • Facilitation of business incorporation and registration of non-nationals for business purposes is now 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:  Chamberlain Eke, Commercial Specialist, U.S. Commercial Service, Nigeria, at