How does Nigeria payroll tax work in 2026?

Two additional employer levies apply in Nigeria. The Nigeria Social Insurance Trust Fund (NSITF) levy funds the employees compensation scheme for work-related injuries and occupational diseases. The rate is 1% of the monthly payroll. The Industrial Training Fund (ITF) levy is 1% of the annual payroll for employers with 25 or more staff or an annual payroll above a set threshold. Both rates are set by their governing statutes; the exact current values should be confirmed with the relevant authority before each payroll run.

Pension: the employer minimum

Under the Pension Reform Act 2014, the employer minimum contribution is 10% of monthly emoluments. An employer may opt to bear the full cost of contributions, in which case the minimum is 20% of monthly emoluments. Pension contributions must be remitted within 7 working days of salary payment to a licensed Pension Fund Administrator chosen by the employee. Failure to remit attracts penalties from the National Pension Commission (PenCom).

Who is covered

The contributory pension scheme covers private sector employers with 15 or more employees. Employers with fewer than 15 staff are encouraged to join voluntarily. Public sector employees at the federal level are also covered. The National Housing Fund contribution, which was previously compulsory at 2.5% of basic salary, became voluntary for private sector employees following the Business Facilitation Act 2022 amendment.

The employee's pension deduction is made by the employer from gross salary before the employee receives net pay. The employer then remits both the employer and employee shares to the employee's chosen Pension Fund Administrator within 7 working days of payday.

The combined minimum contribution under the Pension Reform Act 2014 is 18% of monthly emoluments: 10% employer plus at least 8% employee. Sources differ on the precise employee rate. PenCom's official FAQ has cited 7.5% in some versions while the 2014 Act text sets 8% as the minimum. Employers should confirm the current rate directly with their Pension Fund Administrator or PenCom before processing payroll.

What counts as monthly emoluments

Monthly emoluments for pension purposes include basic salary plus housing allowance and transport allowance. Variable pay such as overtime, bonuses, and commission is generally excluded unless a contract or collective agreement specifies otherwise. Employers should confirm the exact emoluments definition with their Pension Fund Administrator.

Employees exempt from PAYE

Workers whose total annual earnings do not exceed NGN 800,000 per year pay no income tax. Workers earning the national minimum wage of NGN 70,000/month are fully within this zero-rate band and are exempt from PAYE deductions on that income.

The zero-rate band and minimum wage exemption

Workers earning NGN 800,000 or less per year pay no income tax. The national minimum wage is NGN 70,000/month, which works out to NGN 800,000 per year. Minimum wage workers sit exactly at the zero-rate ceiling and owe no PAYE.

What changed from 2026

The Nigeria Tax Act 2025 replaced the Consolidated Relief Allowance with a clean zero-rate band on the first NGN 800,000 of income. It also introduced a new rent relief of up to NGN 500,000 per year. The rate schedule above reflects these changes as confirmed by PwC Worldwide Tax Summaries, Nigeria individual income taxes.

State-level income tax

Personal income tax in Nigeria is administered by State Internal Revenue Services, not the federal government. Each employee's PAYE is remitted to the state where the employee works. Tax residency follows the place of work, not the place of residence. Foreign nationals working in Nigeria are taxable on Nigeria-source income from the date they begin work.

The PAYE remittance calendar for a Nigeria employer:

• Monthly PAYE remittance: deducted from each employee's gross salary and paid to the relevant State Internal Revenue Service by the 10th of the following month
• Pension remittance: both employer and employee pension contributions must be remitted to the employee's Pension Fund Administrator within 7 working days of salary payment
• Annual employer return: a return of all emoluments paid to employees during the prior year is due by 31 January

Payroll in Nigeria runs monthly. This is the universal private sector standard and aligns with both the PAYE remittance structure and the pension remittance deadline.

Which State Internal Revenue Service receives the PAYE

PAYE is remitted to the state where the employee works. A company with employees in Lagos, Abuja, and Port Harcourt must maintain separate remittance records for each state authority. Employees working remotely from home states may require registration with additional state authorities. Confirm current state registration requirements with a Nigeria-qualified tax adviser.

1. Collect pay data

   Gather basic salary, housing allowance, transport allowance, and any variable pay for the month before the payroll run closes.

2. Calculate gross pay and pension

   Total monthly emoluments. Deduct the employee pension share and add the 10% employer pension contribution to determine the full payroll cost.

3. Calculate PAYE deductions

   Apply the six-band Nigeria income tax schedule to annual equivalent earnings. Employees whose total annual income does not exceed NGN 800,000 owe no PAYE.

4. Pay net salaries

   Pay employees their net salaries after pension and PAYE deductions. Document each payslip with gross pay, all deductions itemised, and net take-home.

5. Remit PAYE to State Internal Revenue Service

   Transfer the PAYE deductions to the relevant State Internal Revenue Service by the 10th of the following month. Employers with staff in multiple states remit separately to each.

6. Remit pension contributions to PFA

   Transfer both employer and employee pension contributions to the employee's Pension Fund Administrator within 7 working days of salary payment.

Nigeria operates a defined-contribution pension system under the Pension Reform Act 2014. Each employee holds a personal Retirement Savings Account with a licensed Pension Fund Administrator (PFA) of their choice. The employer remits both shares directly to the PFA.

How contributions work in payroll

The employer deducts the employee's share from gross salary and adds the employer's own share. Both are remitted together to the employee's PFA within 7 working days of salary payment. The deduction is calculated on monthly emoluments: basic salary plus housing allowance plus transport allowance.

Minimum wage workers

Workers earning NGN 70,000/month (the national minimum wage) are covered by the pension scheme if the employer has 15 or more employees. Pension contributions are calculated on their emoluments even though they pay no income tax.

Employer-pays-all option

An employer may choose to bear the full pension cost. In that case the minimum total contribution rises to 20% of monthly emoluments, all paid by the employer. The employee's payslip shows no pension deduction. This option is uncommon but legally available under the Pension Reform Act 2014.

Employees Compensation Act

Separately from pension, the Nigeria Social Insurance Trust Fund (NSITF) administers the Employees Compensation Scheme. Employers contribute 1% of monthly payroll to the fund. This covers employees for work-related injuries and occupational diseases. It is not pension; it is a no-fault work injury fund.

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Key sources: PwC Nigeria individual income taxes, PenCom pension contribution FAQ, NSITF about, and the Nigeria Tax Act 2025 overview.