The hospitality and tourism industry in Nigeria is one of the most lucrative and fast-growing industries in the country, generating an estimated annual revenue of over 2 billion. Setting up a hotel business is attractive, but it is not without legal and regulatory rigours. This article aims to outline how to set up a hotel business in Nigeria.
HOW TO SET UP A HOTEL BUSINESS IN NIGERIA
1. Due Diligence and Market Research
Ensure that you conduct market feasibility (location demand, average room rates, occupancy, competition) and financial modelling. This will enable you to familiarise yourself with the pricing and industry standards that are obtainable in the market. In addition to this, it is important that you carry out legal due diligence on the site or property that you intend to utilise for the business; confirm title and lease, check land use and zoning with the relevant state planning authority, identify encumbrances, and confirm that there are no restrictions, especially when dealing with bare lands.
2. Choose and Register your Business Structure with the Corporate Affairs Commission
Most hotels operate as private limited liability companies for investor protection and ease of raising capital. It also makes your company legally recognised and trusted in a highly saturated market. Therefore, business owners are advised to incorporate their companies with the Corporate Affairs Commission.
3. Obtain Sector Registrations and Operational Licenses
Running a hotel requires multiple sectoral registrations that span the national, State and local government levels. However, there are two inevitable high-value registrations: the Nigerian Tourism Development Corporation (NTDC) and State tourism boards or ministries.
4. NTDC registration
Hotel businesses are legally required to register with the NTDC. This increases credibility and is often useful for access to promotional programmes. The following documents are to be submitted with the NTDC for registration:
Requirements for NTDC registration include:
- Filled application form
- CAC Certificate of Incorporation
- Applicants’ identification documents,
- Memorandum and Articles of Association,
- Tax clearance certificates of directors’ personal tax for the past three years
- Bank reference letter
- Company profile
- CVs of main staff (with professional licenses where relevant)
- Passport photos of the Managing Director/CEO
- PAYE tax remittance for employees
- Receipt for Directors’ development levy
- Proof of payment of mandatory fees
5. Obtaining a License or Permit from the State Tourism Board or the Ministry
Many states require hotels to obtain a license or permit from the state Ministry of Tourism or similar body (e.g., Lagos State Ministry of Tourism, Arts & Culture). Where certain beverages, such as liquor, will be sold, the hotel is required to get a liquor license. The requirements and fees to obtain these licenses or permits vary by State.
6. Food Safety, Catering and Restaurant Permits
Most hotels render catering and restaurant services whose operation must comply with NAFDAC food regulations and local public health requirements. Food items produced or processed on-site may require registration or inspection under NAFDAC guidelines; food handlers should hold health certificates, and the kitchen should satisfy public health and GMP standards. [1]
7. Fire Safety and Building Compliance
It is important to obtain a Fire Safety Certificate from the Federal or State Fire Service following inspection and approval of fire-safety installations (hydrants, detection, alarms, means of escape). This is mandatory for commercial premises and often needed for insurance and local permits. In addition, it is necessary to safeguard lives and properties within and outside the hotel.
8. Tax Registration
Companies registered within Nigeria are mandated to register with the Nigerian Revenue Service, formerly, Federal Inland Revenue Service. Hotels are subject to corporate income tax (CIT), VAT on taxable supplies, and Pay As You Earn (PAYE) on employees’ salaries, especially where the business has an annual turnover of not less than N50 million. However, it must be noted that companies with an annual turnover of N50 million or less are exempted from company income tax.
9. Data Protection
Hotels collect and process personal data, including guest details, payment info, etc. Compliance with Nigeria’s data protection regime (NDPR and any NDPA/updated rules) is essential; privacy notices, lawful basis for processing, security controls, and breach response plans should be in place.
Conclusion
Starting a hotel business is highly profitable and guarantees great prospects with the right team. Hence, business owners are advised to carry out their due diligence, understand the legal and regulatory terrain to avoid wastage of capital, manpower and investment.
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[1] https://nafdac.gov.ng/food/food-guidelines
