In the last couple of years, the ever-bustling urban cities of Nigeria have witnessed an unprecedented surge in the real estate market. This turn of events has greatly impacted the hospitality industry paving the way for short-term rental businesses like the Airbnb business model. In this article, we will be sharing what you need to know about how to start an Airbnb business in Nigeria, with special emphasis on creating the listing platform itself. Not the host or guest. Stay glued to the end to find out.
WHAT IS AN AIRBNB?
The name comes from the business model of an existing vacation rental listing company, Airbnb. Air Bed and Breakfast, also known as Airbnb, is a platform that connects people who are looking for local places to rent on a short-term basis with those with places available in a given area.
The Airbnb business model has the following parties:
i. Host: Rents out a property using an Airbnb platform
ii. Guest: Uses the property rented out by the host on rent
iii. Airnbn: The property listing platform on which the host and guest meet (which is our key focus)
GENERAL CONSIDERATIONS FOR STARTING AN AIRBNB BUSINESS IN NIGERIA
Here are a few things to consider before starting an Airbnb listing platform business in Nigeria.
1. Location sourcing: It cannot be overemphasized how important it is to situate your listed properties in a high-demand area that is easily accessible to your target audience.
2. Accessibility: Most tourists and visitors prefer to stay in locations close to tourist sites with easy access to the airport, shopping mall, bank, or hospital. However, it is important to discover what is allowable by the local council where the property is situated.
3. Capital: There is no fixed capital for starting an Airbnb business. However, a proper financial analysis is required to ensure you get a good start.
4. Property: Another thing to consider is the type and size of the property. Any type of property can be used for an Airbnb business. It can be a bungalow, self-contained apartment, or duplex with two to four bedrooms. What matters is that the property has the right amenities. For example, it should have a kitchen with pots, cutlery, a refrigerator, a cooker, an iron, a microwave, a dryer, an air conditioner, a washing machine, access Wi-Fi, etc.
5. Provide Safety Guidelines for users of the platform: For the safety of your visitors and the property, you must comply with safety standards and provide safety guidelines by ensuring that functional smoke and carbon-monoxide detectors, fire extinguishers, and emergency exits are installed. Regular safety inspections are recommended.
HOW TO START AN AIRBNB BUSINESS IN NIGERIA – LEGAL CONSIDERATIONS
Starting a vacation rental or a short-term rental listing platform similar to Airbnb business in Nigeria requires compliance with local laws and regulations. We will consider key legal aspects you may need to address;
a. Business Registration: Generally speaking, starting any business in Nigeria requires registration with the Corporate Affairs Commission (CAC). Thus, an Airbnb business is not exempted. It must be registered with the CAC to formalize it as a legal entity. This is necessary for protecting your brand and personal assets. We recommend you speak with a business lawyer for advice on the type of entity that will be suitable for your Airbnb business model.
b. Tax registration and compliance: This is mandatory for all businesses operating in Nigeria for tax filing and clearance purposes. All companies are required by law to carry out tax registration not more than 6 months after registration. Failure to do so attracts a penalty of N50,000 (fifty thousand naira) for the first month, and N25,000 (twenty-five thousand naira) for subsequent months in which tax registration was not carried out. Companies are required to charge and remit VAT at a rate of 7.5% on rental income. They are also subject to personal income tax by filing tax returns and paying the applicable taxes based on their income bracket. Where there are collaborations with other businesses or service providers, they are required to deduct and remit withholding tax at a rate of 10%.
c. Privacy and Data Protection: Section 35 of the Constitution guarantees the right of Nigerians to privacy. Other legal instruments that guarantee the right to data security and privacy are the Nigerian Data Protection Regulation (NDPR), the Universal Declaration of Human Rights, the African Charter on Human and Peoples Rights, etc. Hosts or platform service providers are to ensure compliance with these laws on privacy and data protection by ensuring that sensitive guest information provided by users on their digital platforms is protected.
d. Developing User contracts: Depending on how your property rental listing platform is designed to operate, agreements that define the relationship between your listing platform and users of the platforms must be put in place.
e. Local regulations: There is no uniform legal legal framework regulating the short-term rental business. Recourse must be made to State laws, By-laws, and local authorities for legal compliance.
f. Ensuring compliance with consumer protection law: Under the Federal Competition and Consumer Protection Act, hosts are to ensure that guests’ rights to transparent terms and fair refund policies are guaranteed.
g. Permits and Licenses where applicable: To float an Airbnb business, the host must obtain the necessary permits and licenses from the local authority where the business or property is situated. For instance in Lagos, permits must be obtained by the Lagos State Building Control Agency to operate a short-term rental business, and the Hotel Occupancy and Restaurant Consumption license which indirectly covers short-term rental services and all other necessary permits.
Depending on the business model, all legal considerations listed above may not be required, and there are other considerations not listed that may be required. We therefore recommend that professional legal advice that will be tailored to your unique business model be sought and obtained.
LEGAL CONSIDERATIONS FOR FOREIGNERS SEEKING TO START AIRBNB BUSINESS IN NIGERIA
As earlier stated, there is no uniform national legislation that regulates the operation of short-term rental business in Nigeria. Recourse is made to other legislations to regulate the operations of short-term rental businesses; for example, CAMA 2020. Foreigner participation is provided for under Section 80 of CAMA 2020. In other words, foreigners are allowed to own businesses including an Airbnb business in Nigeria upon taking the following steps:
- Registering their business with the CAC,
- Obtaining the necessary approvals from NIPC (Nigerian Investment Promotion Commission),
- Obtaining a certificate of capital importation from a licensed bank in Nigeria and other business permits. It must be noted that not all sectors are open to foreign investors like the arms and ammunition sector. Real estate is permissible for foreigners when the necessary approvals and permits are obtained.
For more information, read our article on LEGAL CONSIDERATIONS FOR STARTING A BUSINESS IN NIGERIA AS A FOREIGNER.
CONCLUSION
The real estate market is an evolving market and the Airbnb business is a lucrative variant that affords host good returns on investment so long as the considerations highlighted above are relied on. Airbnbs are easier to book, especially during peak festive periods. It affords visitors a wide variety of options to choose from offering space and privacy. If you are considering starting a vacation or short-term rental business with the Airbnb model, or you are a foreigner seeking to start an Airbnb business in Nigeria, this article should serve as your guide.
For legal advice on starting your Airbnb business in Nigeria, please send a request for legal consultation through the Whatsapp icon on this page or HERE, and our team will respond to you.
