Payroll in Nigeria 2026: new PAYE bands, pension and NSITF

In Nigeria the employer deducts PAYE under the Nigeria Tax Act 2025 and the employee's 8% pension contribution from each salary. Both are remitted monthly, PAYE to the state tax authority. On top of salary the employer pays at least 10% pension, at least 1% to the NSITF and group life insurance.

Nigerian payroll at a glance

Pension, NHF, NSITF and other contributions

Pension. The Pension Reform Act 2014 sets minimum contributions of 10% by the employer and 8% by the employee of monthly emoluments. Monthly emoluments are defined by the employment contract but may not be less than basic salary plus housing and transport allowances. The rates can be raised by agreement, and an employer can choose to bear the whole contribution, at no less than 20%. In the private sector the Act applies to organisations with 15 or more employees; employees of organisations with fewer than three employees and self-employed people can join under PenCom guidelines. Each employee opens a retirement savings account with a Pension Fund Administrator of their choice. The employer deducts the employee's share and remits both shares to the Pension Fund Custodian within 7 working days of the day salaries are paid.

Group life insurance. On top of the contributions, every employer must keep a group life insurance policy for each employee of at least three times their annual total emoluments.

National Housing Fund. The Federal Mortgage Bank of Nigeria states that all Nigerians in employment must contribute 2.5% of their monthly salary to the NHF under the NHF Act 1992. The employer registers with FMBN, has employees registered, deducts the contribution at source and remits it with a schedule of payment.

NSITF. Under the Employees' Compensation Act 2010, every employer makes a minimum monthly contribution of 1% of its total monthly payroll to the Employees' Compensation Fund, which can be adjusted for an industry's occupational risk.

ITF. Employers covered by the Industrial Training Fund Act pay a training contribution, and the ITF reimburses up to 50% of the contribution paid by employers registered with it.

PAYE under the Nigeria Tax Act 2025

The Nigeria Tax Act 2025 took effect on 1 January 2026 and repealed the Personal Income Tax Act; the Nigeria Tax Administration Act 2025 sets the filing and remittance rules. An individual's chargeable income is total income less eligible deductions, and the Fourth Schedule sets the rates:

Eligible deductions (section 30) are the employee's contributions to the National Housing Fund, the National Health Insurance Scheme and pension under the Pension Reform Act, interest on a loan for an owner-occupied home, life insurance or annuity premiums, and a rent relief of 20% of annual rent paid, up to ₦500,000, provided the employee declares the actual rent paid. Deductions must be claimed in writing in the form the tax authority prescribes.

No consolidated relief allowance. The old consolidated relief allowance of the Personal Income Tax Act is not among the eligible deductions. Instead, the 0% band covers the first ₦800,000; the government's tax reform committee describes this as annual gross income of about ₦1,200,000 being exempt.

Minimum wage earners. Employment income of a person who earns the national minimum wage or less is exempt, so no PAYE is deducted.

The employer's duty. Tax is deducted from every payment of emoluments, and the deductions over the year must add up to the tax chargeable on the employee's emoluments for that year. PAYE is paid to the tax authority of the state where the employee has their place or principal place of residence on 1 January of the year (or on the day they start the job).

Minimum wage and mandatory pay

Minimum wage: ₦70,000 a month. The Federal Government approved this figure in July 2024 and agreed that it would be reviewed every three years; the Nigeria Tax Act refers to the minimum wage prescribed by the National Minimum Wage (Amendment) Act 2024.

Extra pay: there is no statutory 13th month salary. Allowances, leave, overtime and bonuses follow the employment contract, any collective agreement and labour law. Compensation for loss of employment is exempt from income tax up to ₦50 million.

Monthly payroll calendar and annual returns

Before the first payroll: obtain a Tax ID for the business (the Joint Revenue Board and the NRS opened the Nigerian Tax ID portal from 1 January 2026), register with the state tax authority for PAYE, with FMBN for NHF and with the NSITF, and make sure each employee has a retirement savings account with a Pension Fund Administrator.

Every month:

• deduct PAYE, pension and NHF when you pay salaries
• remit pension, both shares, within 7 working days of paying salaries
• file the monthly return and remit the tax deducted; under the Nigeria Tax Administration Act 2025, tax deducted at source that is not remitted by the 21st day of the following month attracts a penalty of 10% a year plus interest at the Central Bank's monetary policy rate
• remit NHF to FMBN and the NSITF contribution

Failing to deduct tax at all is penalised at 40% of the amount not deducted.

Every year: file the employer's return of all emoluments paid to employees in the previous year by 31 January, showing for each employee gross emoluments including allowances and benefits in kind, total deductions, net emoluments and tax deducted. Employees also file their own annual return of income; the NRS gives employed individuals a deadline of 90 days after the end of the tax year.

Worked example: ₦500,000 a month in 2026

An employee earns ₦500,000 a month (₦6,000,000 a year), all of it basic salary plus housing and transport allowances, so the pension base is the full salary. They claim no rent relief, and the example leaves out NHF to keep the arithmetic simple.

Annual pension is ₦480,000, so chargeable income is ₦6,000,000 − ₦480,000 = ₦5,520,000. Tax: 0% on the first ₦800,000, 15% on the next ₦2,200,000 (₦330,000) and 18% on the remaining ₦2,520,000 (₦453,600), so ₦783,600 a year or ₦65,300 a month.

The group life insurance premium and any ITF contribution come on top. If the employee pays rent of ₦1,200,000 a year and declares it, the rent relief of ₦240,000 cuts tax by ₦43,200 a year, or ₦3,600 a month. If they contribute 2.5% to the NHF, that amount is deducted from pay and also reduces chargeable income.

Common mistakes

1. 1Still applying the consolidated relief allowance and the old bands to 2026 salaries.
2. 2Deducting PAYE from minimum wage earners, who are exempt.
3. 3Calculating pension on basic salary alone. Monthly emoluments may not be less than basic salary plus housing and transport allowances.
4. 4Remitting pension late. The deadline is 7 working days after salaries are paid, not the end of the month.
5. 5Remitting PAYE to the wrong state instead of the state where the employee lived on 1 January.
6. 6Granting rent relief without the employee's declaration of the rent actually paid.
7. 7Missing the 31 January annual return of emoluments.

For a smooth month-end, see our month-end close checklist.

How Clientlly helps

Clientlly ships a built-in payroll profile for Nigeria: the Nigeria Tax Act 2025 bands with the 0% band as an allowance, the 8% employee and 10% employer pension rates, the 1% NSITF contribution, pension as a deduction before tax and the ₦70,000 minimum wage, checked against official sources on 1 October 2026. It calculates gross to net and the employer contributions, produces payslips, supports recurring payroll adjustments, and imports employees and payroll data; an administrator can adjust the rates in the payroll tax settings. The profile models one employee in a primary job, single, without dependants, at national level, with pension on the gross salary, so rent relief, NHF, the minimum-wage exemption, state rules and personal circumstances must be checked.

The Clientlly HR module also handles leave requests and approvals with a leave calendar and keeps HR documents in one place, and attendance and time tracking records hours and overtime for you to review before payroll.