The Franchise Bill in Nigeria: A Turning Point for Regulation

Nigeria could revolutionize franchising with a new bill providing a legal framework and stronger protection for franchisees.

The Franchise Bill in Nigeria: A Turning Point for Regulation

The franchising landscape in Nigeria is about to undergo a major change, not yet through an enacted law, but with the Franchising (Establishment) Bill 2022 (the "Franchising (Establishment) Bill 2022") which has been passed by the Senate. Its adoption is a strong signal eagerly awaited by many stakeholders. This is a crucial development that could profoundly transform the rules of the game for businesses, whether Nigerian or foreign.

Here are the key changes and the most important points this bill intends to introduce:

1. Establishing a Formal Legal Framework

Currently, franchise law in Nigeria is fragmented and scattered. A franchisor wishing to establish themselves must navigate contract law, intellectual property law, competition law, and the requirements of the NOTAP (National Office of Technology Acquisition and Promotion).

What is changing: The bill proposes the creation of a unified legal framework, providing an official definition of franchising and recognizing this business model as a distinct sector. This would clarify the rights and obligations of each party, thereby reducing legal uncertainty and potential disputes.

2. Franchisee Protection

Under the current legal framework, Nigerian franchisees are often in a weak contractual position against international franchisors, who may impose unbalanced terms.

What is changing: The franchise bill aims to rebalance this relationship. It imposes new obligations on franchisors, including:

  • Pre-contractual disclosure requirement: This is one of the most important changes. The bill requires franchisors to provide a full disclosure document to potential franchisees a set number of days before signing the contract. This document must include essential information on the franchisor’s history, financial status, fees, royalties, obligations of both parties, and other crucial details. This aims to allow the franchisee to make an informed decision and avoid being disadvantaged by a lack of information.
  • Regulation of contract clauses: The bill regulates certain contract clauses to prevent abuses, such as unmet exclusivity rights or unreasonable non-compete clauses.
  • Creation of a dispute resolution system: A specific mechanism will be established to arbitrate franchise-related conflicts, offering a faster and more specialized alternative to conventional courts.

3. Mandatory Registration of Agreements

Currently, only technology transfer agreements must be registered with NOTAP. A franchise agreement can exist without registration if it does not include a technology transfer formally recognized by NOTAP, leaving a legal gap.

What is changing: The bill makes the registration of all franchise agreements mandatory, including those concluded between a foreign franchisor and a Nigerian franchisee. This measure will allow better oversight of the sector and ensure that agreements comply with Nigerian standards.

4. Promotion of "Local Content"

The Nigerian government has a strong policy on "local content" to encourage the growth of domestic industries and job creation.

What is changing: The bill requires franchising operators in Nigeria to achieve a minimum of 20% local content in their operations. This means franchisees will, as much as possible, source goods and services locally rather than importing all materials and products from abroad. This could have a significant impact on the supply chains of international franchises.

Perspective

This bill is a sign of maturity for the Nigerian franchise market. If finally enacted, it could attract more foreign investors by providing a clearer and safer legal framework. For Nigerian entrepreneurs, it would strengthen their protection and give them greater confidence to engage in this business model. The most anticipated news to date is the President’s final enactment of this law, which would mark its entry into force and the beginning of a new era for franchising in Nigeria.

Note : For a detailed look at the legal framework and regulations governing franchising in South Africa, read our comprehensive article: Understanding Franchise Regulation in South Africa: A Comprehensive Legal Overview.

By the editorial team of AfricaFranchise.com