Our guide to Payroll in Nigeria

Doing Business in Nigeria

Nigeria retained its ranking by the IMF as the fourth-largest economy in Africa in its 2025 rankings.

The petroleum industry continues to be a major driver of Nigeria's economy. In real terms, Nigeria's real GDP grew by 4.23% year-on-year in Q2 of 2025, compared with 3.48% in the corresponding period of 2024. The oil sector drove much of this expansion, recording a real growth rate of 20.46%, compared with a 10.08% in Q2 of 2024, and its contribution to aggregate GDP rose to 4.05% from 3.51% a year earlier. Mining and quarrying also expanded significantly by 20.86% in real terms, with quarrying up by 50.41% and coal mining higher by 32.59% compared with Q2 2024. Despite the strong rebound in oil, the non-oil economy continued to dominate, accounting for 95.95% of total output. It grew by 3.64% in real terms, higher than 3.26% in Q2 of 2024 and 3.19% in Q1 of 2025.

Agriculture contributed 26.17% to GDP, down slightly from 26.53% in Q2 of 2024, but posted a recovery in growth of 2.82% compared to 0.07% in the previous quarter. Industry grew by 7.45%, more than double the 3.72% recorded in the same period of 2024, although manufacturing slowed to 1.60%, with its share of GDP dropping to 7.81%. The key drivers of this growth are the oil sector, mining and quarrying, agricultural, telecommunications, real estate, finance, trade, construction, and energy-related services sectors (based on a GDP report released by Nigeria’s National Bureau of Statistics).

According to the World Bank and the IMF, Nigeria's current population is estimated to be between 230 and 237 million people. Nigeria's official language is English.

Nigeria has a business culture that reflects the resilience of its people. Business hours are usually from 8.00 am to 5.00 pm, Mondays to Fridays. Nigeria also observes various public holidays comprising the significant religious holidays of the dominant religions in the country and other government sanctioned holidays.

Basic Facts about Nigeria

General Information

Full Name: The Federal Republic of Nigeria

Population: 218 million (World Bank, 2022)

Capital: Abuja

Largest City: Lagos

GNI Per Capita: US $2,140 (World Bank 2022)

Main Industries: Oil & Gas

Main Language: English

Monetary Unit: 1 Naira = 100 Kobo

Internet Domain: .Ng

International Dialing Code: +234

Public Holidays

Thursday, 1 January 2026: New Year's Day

Monday, 30 March 2026: Eid El-Fitr

Tuesday, 31 March 2026: Eid El-Fitr Holiday

Wednesday, 1 April 2026: Eid El-Fitr Holiday

Saturday, 18 April 2026: Good Friday

Monday, 20 April 2026: Easter Sunday

Tuesday, 21 April 2026: Easter Monday

Friday, 1 May 2026: Workers' Day

Friday, 12 June 2026: Democracy Day

Saturday, 5 September 2026: Id el Maulud

Thursday, 1 October 2026: National Day

Friday, 25 December 2026: Christmas Day

Saturday, 26 December 2026: Boxing Day

Thursday, 31 December 2026: New Year's Eve

Dates & Numbers

Dates are usually written in the date, month and year sequence. For example, 1 July 2024 or 1/7/24.

Numbers are written with a comma to denote thousands and a period to denote fractions. For example, N 5,000.20 (five thousand naira and twenty kobo).

Registrations and Establishing an Entity

Registering an entity in Nigeria involves incorporating with the Corporate Affairs Commission (CAC), to incorporate a company in Nigeria, the following steps must be taken:

• Conduct an availability search of the proposed name using the Company Registration Portal on the website of the Corporate Affairs Commission (CAC). If the name is available, a notice of approval will be issued stating that the name is reserved for 60 days.
• The company's memorandum and articles of association (articles) must be prepared, or the model articles provided by the CAC Companies Regulations, 2021 can be adopted. These documents, along with all required information, must be submitted through the CAC digital portal. The articles will be electronically stamped on the CAC digital portal.
• Complete an application for the registration of the company (using Form CAC1.1) on the Company Registration Portal, upload the requisite details and documents for incorporation and pay the CAC registration fee and stamp duty. If the documents are approved, an e-certificate of incorporation, status report and certified extract of the memorandum and articles will be generated.
• The CAC has a stipulated timeline of 24 hours to upload all the relevant documents and/or deal with any issues raised by the application. However, incorporation is typically completed within five to seven working days.

The minimum share capital requirements are:

• For private companies: NGN100,000.
• For public companies: NGN2 million.

Banking

It is mandatory to have an in-country bank account in Nigeria to process payroll.

Generally, banks are open to the public from 0800 to 1600 and are closed on Saturdays and Sundays.

Working Week

The working week in Nigeria is Monday to Friday. The working day for commercial offices is usually eight hours, typically from 0800 to 1700. Lunch breaks range from half an hour to one hour.

Employment Law

The Nigerian Labour Act is the primary law regulating employment in Nigeria. It outlines the rights and obligations of both employers and employees.

As of May 2024, the National Minimum Wage in Nigeria was set at ₦75,000 per month. It's illegal for any employer to pay their workers below this threshold. Startups, often operating on tight budgets, must still adhere to this law. Non-compliance could lead to disputes with employees and attract penalties from labour authorities.

The Pension Reform Act mandates that employers with at least 15 employees must contribute a portion of the employee's salary to a retirement savings account. This is a crucial aspect of employee welfare that startups should not ignore. Ensuring compliance with these guidelines not only fulfills legal obligations but also enhances employee satisfaction and retention.

Termination must be done in accordance with the terms outlined in the employment contract and the Labour Act. Employers must provide proper notice or pay in lieu of notice. Wrongful termination can lead to legal disputes, and the employee may seek redress through the National Industrial Court.

The Nigerian Labour Act ("Act"), which is applicable to mainly unskilled workers, provides different types of leave for employees. These are annual leave, sick leave, and maternity leave. Given that they are provided by law, they are often referred to as statutory leave. This statutory leave has also been adopted for employees not covered by the Act. The Act provides as follows:

• Annual leave – at least 6 days of annual leave with pay after 12 months of continuous service.
• Sick leave – up to 12 working days with pay within a calendar year.
• Maternity leave – a period of 3 months during which the employer is required to pay not less than 50% of the employee's salary. Maternity leave is only applicable to female employees.

A female employee may request for an extension of her maternity leave beyond what has been allowed by the employer for different reasons including serious medical conditions, ill health of baby, etc. The employer will consider each case and decide whether to grant the extended leave based on the circumstances. The employer may also decide to continue to pay the full salary of the employee or reduce same for the additional months taken.

Employers may consider different circumstances that may arise where employees may be required to go on leave. Such circumstances can relate to study, family issues, medical reasons, emergencies, etc. Employers in Nigeria understand the intricacies of work and family life. Therefore, apart from statutory leave, other types of leave that are recognised by employers include study leave, family leave, casual/compassionate leave, paternity leave, relief leave, etc. These types of leave are subject to contract and each employer's internal policies.

Sickness

Subject to the Workmen's Compensation Act, a worker shall be entitled to be paid wages up to twelve working days in any one calendar year during absence from work caused by temporary illness certified by a registered medical practitioner:

In the calculation of sickness benefits only that part of his wages which a worker receives in money (excluding overtime and other allowances) shall be taken into account.

National Service

All graduates of on completion of their course are mandated to a compulsory one-year service to the Federal Government known as the (National Youth Service Corps), although the employee is maintained on the payroll.

National Minimum wage

The national minimum wage in Nigeria ₦30,000 per month (full time)

Tax & Social Security

The Tax Year runs from 1^st January to 31^st December.

All companies are required to register with tax authorities and obtain TIN (Taxpayer Identification Numbers). The registration process takes two to three weeks to be completed.

The contributions payable in respect of each month shall fall on the last day of the month concerned.

You must register with the following statutory authorities:

• Registration with Federal Inland Revenue Service (FIRS)
• Registration with Lagos State Internal Revenue Service (LIRS) – Provided operations will predominantly be in Lagos State.
• Registration with National Pension Commission (PenCom)
• Registration with Nigeria Social Insurance Trust Fund (NSITF)
• Registration with National Housing Fund (NHF)
• Registration with Industrial Trading Fund (ITF) - (the Minimum threshold for an employer to become liable under this scheme is when the employer has in its employ a minimum of 5 employees and/or if its annual turnover is in the region of N50 million.)

Note that some of these processes can overlap, i.e; they can be processed concurrently, excluding registrations with FIRS and LIRS where the former is a prerequisite for the latter.

Also, please note that some of these registrations may attract statutory fees that are not expressly stated.

Registration with State Tax Authority

Some states tax authority, such as Lagos, Rivers and Delta State IRS requires that all employees of the company should register on its e-tax portal, the evidence of registration on the e-tax portal is employees Tax Payer ID and that must be provided before the returns can be filed.

Income Tax

The tax rates are presented in the table below:

The Fourth Schedule of the Personal Income Tax Act sets out how personal income tax is calculated in Nigeria. The tax is imposed on chargeable income, which is the portion of a person's income that remains after all applicable relief allowances and exemptions have been deducted under Section 30(1) of the Act.

The Fourth Schedule establishes six progressive tax bands, meaning that the more you earn, the higher the rate of tax you pay on the additional income not on your entire income. The bands are as follows:

Band 1: First ₦800,000 at 0%

The first ₦800,000 of annual income is completely tax-free.
For example, if an individual earns ₦700,000 in a year, they will pay no tax at all since the entire income falls below the ₦800,000 threshold.

Band 2: Next ₦2,200,000 at 15%

Income that exceeds ₦800,000 but does not go beyond ₦3,000,000 is taxed at 15%.
For instance, if an individual earns ₦1,200,000 in a year, the first ₦800,000 is tax-free, while the remaining ₦400,000 is taxed at 15%. This gives a total tax of ₦60,000.
If the individual earns ₦3,000,000, the first ₦800,000 remains tax-free, and the next ₦2,200,000 is taxed at 15%, resulting in ₦330,000 in tax.

Band 3: Next ₦9,000,000 at 18%

Income above ₦3,000,000 and up to ₦12,000,000 is taxed at 18%.
For example, if someone earns ₦6,000,000 in a year, the first ₦800,000 is tax-free, the next ₦2,200,000 is taxed at 15% (₦330,000), and the remaining ₦3,000,000 is taxed at 18% (₦540,000). This brings the total tax payable to ₦870,000.

Band 4: Next ₦13,000,000 at 21%

Income above ₦12,000,000 and up to ₦25,000,000 is taxed at 21%.
For instance, if an individual earns ₦15,000,000 annually, the first ₦800,000 is tax-free, the next ₦2,200,000 is taxed at 15% (₦330,000), the following ₦9,000,000 is taxed at 18% (₦1,620,000), and the remaining ₦3,000,000 is taxed at 21% (₦630,000). Altogether, the person will pay ₦2,580,000 in tax.

Band 5: Next ₦25,000,000 at 23%

Income that exceeds ₦25,000,000 but does not go beyond ₦50,000,000 is taxed at 23%.
For example, if an individual earns ₦40,000,000 annually, the first ₦800,000 is tax-free, the next ₦2,200,000 is taxed at 15% (₦330,000), the following ₦9,000,000 is taxed at 18% (₦1,620,000), the next ₦13,000,000 is taxed at 21% (₦2,730,000), and the remaining ₦15,000,000 is taxed at 23% (₦3,450,000). The total tax payable in this case amounts to ₦8,130,000.

Band 6: Above ₦50,000,000 at 25%

Any income exceeding ₦50,000,000 is taxed at 25%.
For example, if an individual earns ₦60,000,000 in a year, the first ₦800,000 is tax-free, the next ₦2,200,000 is taxed at 15% (₦330,000), the following ₦9,000,000 is taxed at 18% (₦1,620,000), the next ₦13,000,000 is taxed at 21% (₦2,730,000), and the next ₦25,000,000 is taxed at 23% (₦5,750,000). The remaining ₦10,000,000 (which exceeds ₦50,000,000) is taxed at 25%, giving ₦2,500,000. In total, the tax payable on ₦60,000,000 amounts to ₦12,930,000.

The new tax system provides relief for low income earners and high income tax for high income earners.

Eligible Deductions

Section 30(2)(a) defines eligible deductions as payments made by an individual in a year of assessment in respect of the following:

National Housing Fund Contributions

Contributions made under the National Housing Fund are deductible.

National Health Insurance Scheme Contributions

Contributions made under the National Health Insurance Scheme are deductible.

Pension Contributions

Contributions made under the Pension Reform Act are deductible.

Interest on Housing Loans

Interest paid on loans taken for developing an owner-occupied residential house is deductible.

Life Insurance and Annuity Premiums

Any annuity or premium paid in the year preceding the year of assessment for insurance on the individual's life or that of their spouse, or for a deferred annuity contract, is deductible.

Rent Relief

Twenty percent (20%) of annual rent paid, up to a maximum of ₦500,000 (whichever is lower), is deductible, provided the actual amount of rent paid is accurately declared: An individual paying ₦3,000,000 annual rent is entitled to a 20% deduction (₦600,000), but since the amount exceeds the ₦500,000 cap, the deductible amount is ₦500,000.

Tax audit process

The relevant State Internal Revenue is empowered by law to collect taxes on income of individuals, except the following persons, who are assessed to tax by the Federal Inland Revenue Service:

• Persons employed by the Nigerian Army, Navy, Air Force, and Police Force, other than in a civilian capacity, and officers of the Nigerian Foreign Service.
• Every resident of the Federal Capital Territory.
• Persons not resident in Nigeria who derive income or profit from Nigeria.

Apart from the above, no tier of government has legal authority to impose tax on the income of individuals.

The relevant tax authority are also empowered to carry out tax audit to verify the correction of the amounts paid to the relevant tax authority and if there are any short payment, an assessment will be raised by the tax authority and this will include interest and penalties.

Social Security

Both employer and employees contribute to approve provident funds. In some cases, employees do not make any contribution to pension funds. The eligibility of a worker to benefit from pensions, retirement or gratuity schemes varies from one employer to another. Invariably, the terms are contained in contracts of employment. Social security schemes are approved by the Joint Tax Board and subject to renewal annually.

An employee is required to contribute a minimum of 8% of their Basic, Transport and Housing allowances from their earnings, while the employer contributes a minimum 10% of the same allowances.

Reporting

The deadline for filling annual returns is 31^st January of the following year. The penalty for non-compliance by an individual and a corporate body is N50,000 and N500,000 respectively.

In addition to annual returns all employee are expected to file monthly payee remittance .

Payroll

It is legally acceptable in Nigeria to provide employees with online payslips.

Reports

Payroll reports must be kept for a statuary period of six years.

Payslip Example

The relevant State Internal Revenue is empowered by law to collect taxes on income of individuals, except the following persons, who are assessed to tax by the Federal Inland Revenue Service:

• Persons employed by the Nigerian Army, Navy, Air Force, and Police Force, other than in a civilian capacity, and officers of the Nigerian Foreign Service.
• Every resident of the Federal Capital Territory.
• Persons not resident in Nigeria who derive income or profit from Nigeria.
• Apart from the above, no tier of government has legal authority to impose tax on the income of individuals.

New Starts

A new employee is expected to register in his state of residence either directly for a self-employed person or through his employer as a payee agent.

Leavers

Once an employee leaves the employment of a company, the tax authority must be advised accordingly.

Employee Benefits

Expenses

Amounts allowed are now limited to expenses incurred in performance of duties and from which it is not intended that the employee should make any gain or profit. Employers must consider what qualifies as expenses incurred in performing employment duties as distinct from activities which are the personal responsibilities of the employee. Cost of passage, medical reimbursement etc. may no longer qualify.

Visas & Work Permits

To work in Nigeria, all business visitors must obtain a visa. The application should be made prior to travelling to Nigeria. Applicants should make their request for visa to the Nigerian embassy within their country of origin or current residence. A visa may not be required by citizens of countries that have specific arrangements with Nigeria.

There are three main types of visa:

(1) Ordinary Visa

(2) Diplomatic Visa

(3) Gratis Courtesy Visa

The Ordinary Visais further divided as follows:

(a) Transit

(B) Single Journey

(C) Multiple Journeys

Transit

This type of visa is issued to applicants who wish to pass through Nigeria to a further destination. It may be obtained at a Nigerian mission and is given for a period not exceeding seven days without reference to the Comptroller-General of Immigration. A transit visa may also be given at the port of entry on the specific approval of the Comptroller-General of Immigration.

Single Journey

This is valid for a single entry into Nigeria and may be issued as:

• Short Visit Visa;
• STR Visa (Subject To Regularisation for Residence Work Permit);
• T.W.P (Temporary Work Permit)

The Short Visit Visa

This type of single journey visa is issued to applicants who require a single entry to Nigeria for the purpose of tourism, and/or relations resident in Nigeria.

STR Visa (Subject to Regularisation)

This is the type of visa required by foreigners seeking to take up employment in Nigeria (for a period of more than 6 months).

The employer applies to the Nigerian embassy in the country of residence.

The STR Visa is issued at Nigerian mission without reference to the Comptroller-General of Immigration provided that the applicant presents specified documents. STR visa is normally given for 90 days

Regularisation of Stay

On arrival in Nigeria the expatriate is allowed a 3 month period from the date of his/her arrival to have his/her Stay in Nigeria regularized and his/her status upgraded to that of a Resident.

The Regularization process takes 7 to 10 working days to conclude. At the end of this time, the expatriate is issued a Temporary Residence permit. The more permanent Residence Permit (plastic green card) is issued within 3 months of issuance of the initial Temporary residence permit.

Note: Presently, Nigeria Residence permits are granted for a period of one or two years at the expiration of which the permit has to be renewed if the expatriate is to continue living/working in Nigeria.

Temporary Work Permit (T.W.P)

Companies wishing to engage the services of expatriates for short period assignments (2 – 6 months) are required to apply direct to the Comptroller-General in Abuja. This approval comes in the form of a TWP cable for such expatriates. On receipt of the approval, a foreigner wishing to visit Nigeria on TWP may make an application for a TWP visa at a Nigeria Mission in his country of residence.

The temporary assignments, which are eligible for such approval, include:

• Erection/Installation Work;
• Feasibility Studies;
• Repairs Of Machinery/Equipment;
• Auditing Of Accounts;
• Research Work

This Visa is given for a period not exceeding 2 months and may be extended for a further period.

Visa-On-Arrival (VOA)

The VOA is a short visit stay which is issued to business men on arrival at a Nigeria port. To obtain it, an application will have to be made locally to the Comptroller-General of the Nigeria Immigration Service for an approval. Thereafter, the approval is forwarded to the foreigner to enable him to board a plane to Nigeria and for presentation at the Immigration desk at a Nigeria entry port.

With a VOA approval, the foreigner has no need to visit a Nigeria Mission.

Gratis Courtesy Visa

This type of visa is normally issued to persons who do not qualify for diplomatic visa, but who are foreign government officials traveling on official business. It may be granted in cases where it is considered undesirable to accede to an application for a diplomatic visa, but where it is desirable on grounds of international courtesy to facilitate a journey.

Key updates for 2026

An individual is regarded as a resident for tax purposes in a particular year if any of the following apply:

• Domicile: The person's permanent home is in Nigeria. This means Nigeria is where the person ultimately intends to live and return to, even if they temporarily live elsewhere.
• Permanent home in Nigeria: The person has a permanent place available for personal or family use in Nigeria, such as a house or apartment whether owned or rented.
• Habitual abode: The person regularly lives in Nigeria or spends most of their time here.
• Economic and family ties: The person has strong business or financial interests in Nigeria, or their immediate family (spouse, children, dependents) live in Nigeria.
• Physical presence: The person spends a total of 183 days or more in Nigeria during any 12-month period. These days don't have to be consecutive they can add up over multiple visits.
• Diplomatic service: Nigerian diplomats or diplomatic agents serving abroad are still treated as residents for tax purposes.

A resident individual, therefore, is someone whose life, work, or family is substantially tied to Nigeria.

• What about non-residents?

People who are not resident in Nigeria are only taxed on income that is earned in or derived from Nigeria.
For example, if a foreign consultant provides services to a Nigerian company and is paid for that work, that income is taxable in Nigeria. However, if the same person earns income from a source outside Nigeria that has nothing to do with Nigeria, that income is not taxable by Nigeria.