Foreign brand owners may be interested in the Nigerian market for a variety of reasons. The first is Nigeria’s large population, which totals more than 200 million people. The second reason is that Nigeria is a huge consumer nation, and the third is that fast-moving consumer items are quite popular there. In Nigeria, there are already over 100 franchises in the food, construction, health, and other industries.
One law that regulates franchising is the National Office for Technology Acquisition and Promotion (NOTAP) Act. Nigeria’s major legislation regulating technology transfer is the NOTAP Act. It established the National Office as the organization in charge of overseeing its implementation. The National Office is principally responsible for inspecting the quality of imported technology and registering contracts involving the transfer and acquisition of foreign technology.
However, several elements of the NOTAP Act affect foreign direct investment and foreign trade participation in Nigeria. These rules apply to trademark franchising and licensing, as well as profit repatriation.
Salient provisions affecting trademark franchising
Under Section 4(d) of the NOTAP Act, one of the National Office’s functions is the registration of all contracts or agreements for the transfer of foreign technology to Nigerian parties. It states that “every such contract or agreement shall be so registrable if its purpose or intent is, in the opinion of the National Office, wholly or partly for or in connection with… the use of trademarks”, as well as patents, technology plants and technical expertise. The act further stipulates that foreign franchise agreements, which include the right to use the franchisor’s trademarks, must be registered under the act.
A contract for the use of another’s trademarks, according to the statute, is a contract for the transfer of technology. Franchise agreements are contracts for the transfer of technology because they involve the use of trademarks. As a result, trademark franchising is covered by the National Office’s registration requirements. While there is no criminal penalty for failing to register with the National Office, the practical relevance of registration is nearly unavoidable. The repercussions of failing to register with the office are laid out in Section 7 of the NOTAP Act, which states:
“Subject to section 8 of this Act [Director’s power of cancellation], no payment shall be made in Nigeria to the credit of any person outside Nigeria by or on the authority of the Federal Ministry of Finance, the Central Bank of Nigeria, or any other licensed bank in Nigeria in respect of any payments due under a contract or agreement mentioned in section 4(d) of this Act, unless a certificate of registration issued under the Act is presented by the party or parties concerned together with a copy of the contract or agreement certified by the National Office in that behalf.”
Because payment would be made from Nigeria through bank channels, both parties must register the contract with the National Office for a foreign franchisor to receive any payment from a franchise. Moreover, Section 6(2)(l) of the NOTAP Act provides that: “The Director shall not register any contract or agreement where he is satisfied that it falls within any of the following specification, that is to say – where the contract or agreement is expressed to exceed a period of ten years or other unreasonable term where this is less than ten years.”
In fixed terms, a maximum of ten years is allowed. The purpose of this provision is to encourage and facilitate technology transfer into Nigeria. The fact that the drafter left out the phrase “unreasonable term” in relation to a duration longer than 10 years strengthens this fixed clause, indicating that the act does not intend for such a contract to endure longer than 10 years. Section 6(3), on the other hand, allows for an exception in the case of “national interest.” As a result, the director may only issue certificates for trademark franchising contracts that last more than ten years if it is in the national interest. However, the term “national interest” and the time frame provide issues that must be addressed.
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