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The short answer
A distributor agreement sets out where a distributor may sell, how much they must buy, how much credit you extend and how either side can end the arrangement. In Nigeria it should also state the price currency, be stamped if you may need it in court, and keep any exclusivity or restraint terms reasonable, because restrictive agreements are scrutinised under the competition law.
Why producers need one in writing
Food processors, drinks makers, cosmetics brands and water factories across Nigeria grow through distributors who buy in bulk and sell on to retailers. The relationship often runs on trust until a dispute arrives: a distributor sells outside their area, a producer appoints a second distributor on the same street, or a large credit balance goes unpaid. A written agreement does not stop those things happening, but it decides in advance what each side can do about them.
It also matters for finance. The Bank of Industry's Distributor and Supplier Financing Scheme, for example, asks for an appointment letter and evidence of a verifiable relationship with the manufacturer. A signed agreement is that evidence.
The clauses that do the work
Territory and exclusivity
Define the territory by something checkable: named local government areas, a state, or a list of named markets. Say whether the appointment is exclusive (no other distributor appointed there), sole (only you and the producer sell there) or non-exclusive. Exclusivity is a commercial concession; tie it to performance so it can be withdrawn if targets are missed.
Minimum orders
Set a minimum purchase per month or quarter, in units or naira, and say what happens if it is missed: a warning, loss of exclusivity, then the right to terminate. Avoid making a single missed month a reason to end the deal; markets have bad months.
Credit limit and payment
State the maximum balance the distributor may owe at any time, the payment period (for example, 14 or 30 days from delivery), and that new orders stop when the limit is reached. Link every delivery to a signed delivery note so the balance is never disputed; see our delivery note template. For how sales teams police limits, see credit limits for wholesale distributors.
Price and currency
If you import inputs, you may be tempted to price in dollars. A Templars note from May 2025 explains that section 20(5) of the CBN Act makes it an offence to refuse naira as payment, and that a CBN circular on dollarisation aimed to discourage foreign-currency pricing, though the firm's view is that no statute criminalises pricing in foreign currency where naira is not refused. The safe course for a domestic distributor contract is to price and invoice in naira and include a clause allowing price review on notice.
The template
- Appointment. The Producer appoints the Distributor as its [exclusive / non-exclusive] distributor of the products in Schedule 1 in the Territory in Schedule 2, for [24] months from [date].
- Territory. The Distributor will not actively sell outside the Territory without written consent.
- Minimum purchase. The Distributor will buy at least [quantity or ₦ value] per [month/quarter]. If missed for [two] consecutive periods, the Producer may convert the appointment to non-exclusive on written notice.
- Orders and delivery. Orders in writing (including email or WhatsApp to the named contact). Risk passes on signed delivery. Shortages or damage noted on the delivery note within [24] hours.
- Price. As per the Producer's current distributor price list in naira. Price changes on [14] days' written notice; confirmed orders at the old price.
- Credit. Credit limit ₦[amount]. Payment within [30] days of delivery to [account]. No further supply while the limit is exceeded or any invoice is overdue.
- Brand and quality. The Distributor will store products as labelled, not repackage or alter them, and use the Producer's marks only to sell the products.
- Records. The Distributor will share monthly sell-out and stock reports.
- Termination. Either party may end the agreement on [60] days' written notice. Either may end it immediately for unpaid sums over [60] days, insolvency, or serious breach not fixed within [14] days of notice.
- After termination. Outstanding invoices fall due at once. The Producer may buy back saleable stock at invoice price.
- Disputes. Negotiation for [14] days, then mediation, then the courts of [state].
- Signatures. For each party: name, position, signature, date, witness.
Competition law and restraint clauses
Clauses that stop a distributor from carrying competing brands, or restrict who they can sell to, are restraints. An IBA article (August 2024) notes that the Federal Competition and Consumer Protection Act 2018 deals with restrictive agreements in section 59, and that Nigerian courts have long treated restraints as unenforceable unless reasonable. Keep any non-compete narrow (your product category, the term of the agreement) and take advice before adding anything that lasts after it ends. This is information, not legal advice.
A worked example of a credit limit
Example only. A juice producer sells to a Kano distributor who buys about ₦3,000,000 a month on 30-day terms. The producer sets a credit limit of ₦4,500,000: one month's purchases plus half a month as a buffer. If the distributor owes ₦4,200,000 and orders another ₦600,000, the balance would reach ₦4,800,000, which is ₦300,000 over the limit, so the order is held until a payment comes in. Writing the rule into the agreement makes that a policy, not a personal decision.
Stamping
Under the Nigeria Tax Act 2025, as summarised in an April 2026 journal article, agreements and contracts carry fixed stamp duty under the Ninth Schedule, must be stamped within 30 days of execution, and an unstamped dutiable instrument cannot be used as evidence in civil proceedings. See stamp duty on contracts and confirm the current amount with the Nigeria Revenue Service.
Where Pryme fits
A producer can give each distributor its own virtual account, so payments match the right ledger without guesswork, and raise invoices from Pryme invoicing. Collection follow-ups can follow the steps in AI for accounts receivable.
Questions people ask
Can I appoint two distributors in the same area?
Only if the first appointment is non-exclusive. If you granted exclusivity, appointing a second distributor in that territory is a breach unless the agreement lets you withdraw exclusivity first.
Should a distributor agreement have a minimum order?
Usually yes, especially if you grant exclusivity. Tie the consequence to repeated shortfalls, such as losing exclusivity, rather than ending the deal over one bad month.
Can I price distributor goods in dollars in Nigeria?
Refusing naira as payment is an offence under the CBN Act. Law firms differ on pricing in foreign currency; the safer course for domestic sales is to price and invoice in naira.
Does a distributor agreement need to be stamped?
Agreements are dutiable under the Nigeria Tax Act 2025 and must be stamped within 30 days to be used as evidence in civil court. Check the current duty with NRS.
Sources
- Bank of Industry: Distributor and Supplier Financing Scheme · accessed Oct 2026
- Templars: Pricing in foreign currency under Nigerian law (5 May 2025) · accessed Oct 2026
- IBA: Employment agreement and non-compete clauses, topical issues in Nigeria (27 Aug 2024) · accessed Oct 2026
- Odubunmi, Examining the legal framework for the collection of stamp duties under the NTA 2025, NAU Journal of Private and Property Law (Apr 2026) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.