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Fela and his band, renamed Africa '70, returned to Nigeria. He then formed the Kalakuta Republic, a commune, a recording studio, and a home for many connected to the band that he later declared independent from the Nigerian state. Fela set up a nightclub in the Empire Hotel, named the Afro-Spot and then the Afrika Shrine, where he performed regularly. Fela also changed his middle name to Anikulapo (meaning "he who carries death in his pouch"),[3] stating that his original middle name of Ransome was a slave name.

As popular as Fela's music had become in Nigeria and elsewhere, it was also very unpopular with the ruling government, and raids on the Kalakuta Republic were frequent. In 1974 the police arrived with a search warrant and a cannabis joint, which they had intended to plant on Fela. He became wise to this and swallowed the joint. In response, the police took him into custody and waited to examine his feces. Fela enlisted the help of his prison mates and gave the police someone else's feces, and Fela was freed. He then recounted this tale in his release Expensive Shit.

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