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Nigerian Payroll Intelligence
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Nigerian PAYE Structure
Under the Nigeria Tax Act 2025, the first ₦800,000 of annual income is tax-free, then rates climb from 15% to 25% across 6 bands. Pension and NHIS contributions are relieved from taxable income.
Typical Employer Overhead
Nigerian employers typically incur an additional 18–25% over gross salary due to pension (10%), NHIS (10%), ITF (1%), and NSITF (1%) contributions.
Net vs. Gross Ratio
For mid-range salaries (₦300K–₦800K gross), employees typically take home 65–75% after statutory deductions. Higher earners see lower ratios due to progressive PAYE.
Reference Guide
Nigerian Payroll Explained
How PAYE Works in Nigeria
Pay As You Earn (PAYE) is administered by FIRS and State Revenue Services. The Nigeria Tax Act 2025 replaced the old Personal Income Tax Act bands and abolished the Consolidated Relief Allowance (CRA) — tax relief is now itemized: annual pension contributions, NHIS contributions, and rent relief (20% of rent paid, capped at ₦500,000/yr) are deducted from gross before PAYE is applied.
| Income Band | Rate |
| Up to ₦800,000 | 0% |
| ₦800,001 – ₦3,000,000 | 15% |
| ₦3,000,001 – ₦12,000,000 | 18% |
| ₦12,000,001 – ₦25,000,000 | 21% |
| ₦25,000,001 – ₦50,000,000 | 23% |
| Above ₦50,000,000 | 25% |
Employer Cost Breakdown
Beyond gross salary, employers fund pension (10% of pensionable emoluments), NHIS (10% of gross), ITF (1% of gross, 5+ staff), and NSITF (1% of gross) as workers' compensation.
| Contribution | Employee | Employer |
| Pension (PRA 2014) | 8% | 10% |
| NHIS | 5% of Basic | 10% of Gross |
| NHF (optional, private sector) | 2.5% of Basic | — |
| ITF | — | 1% of Gross |
| NSITF | — | 1% of Gross |
Statutory Deductions Overview
Contractors are subject to 5% Withholding Tax (WHT) instead of PAYE, with no mandatory pension or NHF obligations — but employers also save the matching statutory contributions.
| Deduction | Governing Law | Basis |
| PAYE | Nigeria Tax Act 2025 | Annual taxable income, itemized reliefs |
| Pension | PRA 2014 | Basic + Housing + Transport |
| NHF | NHF Act 2004 / BFA 2022 | Basic Salary — optional for private sector |
| NHIS | NHIS Act | Basic Salary (employee) / Gross (employer) |
| ITF | ITF (Amendment) 2011 | Annual Payroll |
| NSITF | NSITF Act 2010 | Monthly Gross |