Starting a Restaurant in Nigeria: The Legal Issues
Restaurants in Nigeria are big business. In this article we discuss the legal considerations entrepreneurs should have when looking to start one. We will not be looking at the operational and business viability aspects, as that is not our expertise — our expertise is the law, and that is what we will stick to.
Starting a restaurant has its own set of legal considerations. These include choosing the right business structure, obtaining the proper licences and permits, paying the relevant taxes and levies, dealing with health and safety, getting adequate insurance, employing people, and protecting customer data.
Choosing the right business structure
There are four structures you could adopt: a registered business name (sole proprietorship), a partnership, a limited liability partnership, or a limited liability company. One note on LLPs — they used to be available only in Lagos, but since CAMA 2020 they are registrable nationwide under Part C of that Act. For the purposes of this article, we will focus on the two most common choices: the registered business name and the limited liability company.
A registered business name gives you a flexible structure with very few formal restrictions. The biggest legal risk is that there is no separate legal personality between you and the business. In the eyes of the law, you and the business are one and the same, which means unlimited personal liability for anything arising from the business — towards customers, competitors, lenders, employees and the government.
To illustrate: if a customer suffered food poisoning after eating at your restaurant, you as the owner could be sued personally, and your liability would be unlimited. Something that happened in the business could bankrupt you.
A limited liability company is generally the preferred structure, because the company has a separate legal personality from the people who set it up. On the same food poisoning facts, it is the company that is sued, not you personally — subject to the usual exceptions where a director’s own conduct is in issue.
If the objection you have always had to forming a company is that you would need to find a second person, that objection is gone. Under CAMA 2020 a single individual can now form and run a private limited company alone. The minimum issued share capital for a private company is N100,000.
On tax, be careful of the folk wisdom here. It is often said that a company lets you treat things like kitchen equipment as a business cost rather than a personal expense. That is not quite right — a registered business name can also deduct legitimate business expenses. And expensive kitchen equipment is capital expenditure, relieved through capital allowances rather than written off as a running cost. One condition worth knowing under the Nigeria Tax Act 2025: capital allowances are only available on capital expenditure on which VAT or import levies have actually been paid. If you buy your cold room off-invoice to avoid the VAT, you also lose the allowance.
We still suggest that a limited liability company is probably the best structure for a restaurant — the reason is liability protection and credibility with landlords, lenders and franchisors, not a tax trick.
Licences and permits
You will need a range of licences and permits. Some are obtained at the Local Government office, others from an agency of the State Government, and the requirements vary considerably by location — which is why professional advice at the set-up stage is worth the money.
Specific ones to plan for: a liquor licence if you will serve alcoholic beverages; a permit if you will trade at night or past midnight; and signage or outdoor advertising permits, which in Lagos in particular are actively enforced.
Health and safety
The restaurant business is delicate and sensitive because it is fundamentally about people eating food, and it is subject to significant food safety regulation.
Beyond the food handling permit itself, expect regular monitoring and inspection by local or state government officials. Inspections cover not only food, raw and prepared, but also refrigeration, cooking equipment, storage and waste disposal. Individual food handlers are also typically required to hold health certificates, so build that into your hiring process rather than discovering it during an inspection.
One point that catches successful restaurants out: if you begin packaging, bottling or branding anything for sale beyond your own premises — a sauce, a spice blend, a bottled drink — you move into NAFDAC’s territory and will need product registration. Restaurant permits do not cover packaged food products.
Then there is the physical safety of customers on your premises. If you will serve large numbers you may face crowd control requirements and need clearance from the fire service. You will also need to satisfy requirements on emergency exits, fire safety equipment and related matters.
Insurance
Restaurants carry specific risks: customers or staff slipping and falling, burns from hot liquids, injuries from broken glass, and of course serious illness from the food itself. These sit on top of generic risks like fire, theft and property damage.
Sit down with your lawyer and an insurance broker to map the risks and cover them properly. Beyond voluntary cover, some insurance is compulsory — and the law here changed recently. The Insurance Act 2003 has been repealed and replaced by the Nigerian Insurance Industry Reform Act 2025, which the President signed in August 2025.
Under NIIRA 2025, every public building — which means any building not used entirely by its owner as a private residence, so certainly your restaurant — must be insured against collapse, fire, earthquake, storm, flood and other hazards the regulator may specify. The policy must cover the legal liability of both the owner and the occupier for property damage, bodily injury or death suffered by any user of the premises or by third parties.
Note that the obligation falls on the occupier as well as the owner. If you lease your restaurant space, do not assume your landlord’s policy discharges your obligation — check, and get it in writing.
The penalty for non-compliance is a fine of not less than ₦1,000,000, or up to 12 months imprisonment, or both. NIIRA 2025 also broadened the compulsory classes to cover, among others, group life cover for employees, so review your whole insurance position rather than just the building.
Employing people
Restaurants are labour-intensive with high turnover, and this is where a lot of otherwise well-run operations accumulate liabilities quietly. Plan for:
- Written contracts of employment, as required under the Labour Act.
- PAYE. You must register with the internal revenue service of the state where your employees are resident, deduct tax from wages and remit it. Failure to deduct and remit is one of the most heavily penalised defaults in the tax system.
- Pension contributions under the Pension Reform Act, once you cross the employee threshold.
- Employee compensation contributions to the NSITF, which covers workplace injury — highly relevant in a kitchen.
- Industrial Training Fund contributions, which apply once you pass the relevant employee or turnover threshold.
Casual and part-time staffing arrangements, which are common in this sector, do not switch these obligations off. Get advice on how they apply to your particular staffing model.
Data protection
This may seem remote from running a restaurant, but it is not. If you operate a loyalty scheme, take online or app reservations, run CCTV, collect customer contact details for marketing, or handle payment card data, you are processing personal data.
The Nigeria Data Protection Act 2023 created a statutory framework for this and established the Nigeria Data Protection Commission. The Commission’s General Application and Implementation Directive, issued in March 2025, sets out how the Act works in practice and replaced the old NDPR regime entirely.
The Act imposes duties on anyone processing personal data — lawful basis, data subject rights, security, breach notification — and additional registration and audit obligations on those classified as controllers of major importance. Most single-site restaurants will not meet that threshold, but the general duties apply regardless of size, and 2026 is the year the Commission is expected to move from education to enforcement. At minimum: have a privacy notice, do not buy or share customer lists casually, and know who in your business is responsible for this.
Franchising
Franchising is a model where the owner of a brand — the franchisor — sells the rights to their name, logo and business model to independent operators called franchisees. Well-known examples include McDonald’s, Subway, KFC and Domino’s.
As a franchisee you typically pay an initial fee for the rights, training and required equipment, then an ongoing royalty, usually calculated as a percentage of gross sales. You open a replica of the franchise restaurant under the franchisor’s direction. You have less control than you would over your own concept, but you benefit from an established brand.
If this is your route, engage a lawyer not only to review the Franchise Agreement but to conduct due diligence on the franchisor — existing litigation, the health of the master franchise in your region, and the track record of other franchisees.
Two additional points for international franchises specifically. Where the agreement involves the licensing of trademarks and know-how from abroad, it will generally need to be registered with the National Office for Technology Acquisition and Promotion (NOTAP). That registration is what allows you to remit royalties through official channels. And if foreign capital is coming in, ensure a Certificate of Capital Importation is obtained, since it governs your ability to repatriate funds later.
Intellectual property
Discussing IP in an article about restaurants might seem strange, but it is a very valid consideration. Branding is central to a thriving business, and the best way to protect a brand is to protect the trademark.
When choosing your brand, make sure it is available and does not infringe an existing mark. Have a lawyer conduct a trademark search first. Failing to check before you adopt a name can lead to refusal of registration or, worse, a cease and desist letter after you have already paid for signage, packaging and a social media following.
A trademark is also an appreciating asset. The more your reputation and customer base grow, the more valuable the brand becomes, and it is the foundation of any expansion. If you have ambitions to franchise your own concept one day, registration is not optional — you cannot licence what you do not own.
Beyond the brand name itself, consider protecting distinctive product names. McDonald’s holds registered marks for individual menu items such as the Big Mac and Chicken McNuggets.
Tax
Finally, we come to what people love the most… tax.
Nigeria’s tax system was substantially rewritten with effect from 1 January 2026 by four new laws, principally the Nigeria Tax Act 2025 and the Nigeria Tax Administration Act 2025. The Federal Inland Revenue Service has been replaced by the Nigeria Revenue Service (NRS). Any older guidance you find referring to the FIRS, the Companies Income Tax Act or the VAT Act is now out of date.
The main federal taxes for a restaurant business are:
Companies Income Tax. The headline rate is 30%, but small companies pay 0%. Many independent restaurants will fall below the small company threshold and pay no CIT at all — worth checking rather than assuming.
Development Levy. This replaced the old Education Tax and several other levies. Small companies are exempt.
VAT at 7.5%. Restaurant meals are a standard-rated supply, so you charge it, and you can now claim input VAT on a broader range of purchases than before, including services and fixed assets. Note that e-invoicing is now mandatory for VAT-registered businesses.
PAYE and other employment taxes, as covered above.
On top of these, some states impose their own taxes on the hospitality sector. In Lagos, the Hotel Occupancy and Restaurant Consumption Law imposes a 5% consumption tax on goods and services purchased in restaurants within the state. Three practical points:
- The base is 5% of the total bill excluding VAT and service charge — not 5% of everything on the receipt.
- You must register with the Lagos State Internal Revenue Service as a collecting agent, charge the tax, and remit monthly.
- It sits alongside VAT rather than replacing it. A Lagos restaurant collects both, for two different authorities. The relationship between state consumption taxes and federal VAT has been litigated repeatedly, and the position can shift — so check the current state of play before you set your pricing.
Before setting up, get a lawyer or tax adviser who understands the sector and the new legislation, so you do not fall foul of the relevant laws.
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We hope you have found this information helpful. Please note that this information is provided for general informational purposes only and is not intended to be legal advice. No lawyer-client relationship is formed nor should any such relationship be implied. It is not intended to substitute for the advice of a qualified lawyer. If you require legal advice, please consult with a qualified lawyer.