The joint venture is part of Woolworths plans to accelerate its expansion into other African countries.
Africa's consumer spending is forecast to hit US$1.4 trillion in 2020, according to global consultancy McKinsey and Company. Nigeria in particular has attracted attention after its decision to lift a ban on imported textiles.
Two of the group's stores will open in Lagos - one at The Palms and the other at Ikega Mall, while the third store will open in Polo Park in Enugu State. Woolworths plans to open seven more stores in Nigeria over the next two years.
"We are confident about our investment in Nigeria and we are very pleased with the growth prospects of the Nigerian market.
"The country has a large population with significant and growing middle and upper income groups," said John Fraser, divisional executive for Woolworths International.
Nigeria's potent potential has made it the bull's eye of foreign and local retail companies as the country de jour in which to set up shop, despite obvious risks in the most populous country in Africa.
With a score that has nearly doubled over the past decade on the Goldman Sachs' growth-environment index, consumer demand among Nigeria's 150 million plus population - half of which are under the age of 30 years - is at an all-time high, and it comes as no wonder that Citigroup chief economist Willem Buiter has predicted it to be the world's fastest growing economy between now and 2050.
Woolworths said joint ventures with local partners, such as Chellarams Plc, was the new business model for its expansion plans in other African countries.
"We have moved away from the franchise model we had in the past in some African countries. It's not only a better profit model for Woolworths, but it's also better for customers," said Fraser.
Ian Moir, the company's CEO said moving away from franchise to joint ventures meant more control and profit.
"The business model will be revised - at the moment we bring goods into SA and export them back and incur a lot of duty, which makes our goods expensive. Through a system of duty drawback we can reduce the duties and transfer that to lower prices," he said.
He added that in doing so the group could increase margins and in turn this would increase the accessibility and improve the profitability of the brand in Africa.
Woolworths has had a presence in African countries for over 10 years and currently has stores in countries such as Botswana, Namibia, Lesotho, Swaziland, Ghana, and Zambia among others.
Woolworths aims to open 16 stores in African countries this year taking the total number of stores to 60 in the current financial year.
Pepkor, who's stores include Ackermans and PEP will open 50 outlets in a R100 million first phase expansion plan into Nigeria, and Durban-based discount fashion chain Mr Price (MPC) has said its population could easily support 50 to 100 stores.
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