Nigeria operates a structured tax system to ensure sustainable revenue generation and provide social benefits to its citizens. For employees in the formal sector, taxation and statutory deductions are guided by federal laws and administered through various government agencies.
1. Pay-As-You-Earn (PAYE)
Applicable Monthly PAYE Rates (Progressive Scale)
- First ₦25,000 → 7%
- Next ₦25,000 → 11%
- Next ₦41,667 → 15%
- Next ₦41,667 → 19%
- Next ₦133,333 → 21%
- Above ₦266,667 → 24%
Tax Reliefs and Allowances (as per the Personal Income Tax Act, PITA):
- Consolidated Relief Allowance (CRA): 20% of gross income + ₦16,666.67
- Pension contributions: Deductible
- NHF and NHIS contributions: Deductible
- Life assurance premiums: Deductible
Note: PAYE is remitted monthly by the employer to the relevant State Internal Revenue Service.
2. National Health Insurance Scheme (NHIS) (Now under the National Health Insurance Authority - NHIA)
The NHIS, now expanded under the NHIA Act of 2022, ensures universal health coverage for employees.
Contribution Rates (Public and Private Sector):
- Employer: 10% of Basic Salary
- Employee: 5% of Basic Salary
- Total Contribution: 15%
3. National Housing Fund (NHF)
The NHF is a government initiative managed by the Federal Mortgage Bank of Nigeria (FMBN) to provide accessible housing finance for Nigerian workers.
Contribution Rate:
- Employee: 2.5% of monthly basic salary.
- Employer: Required to deduct and remit, but not required to contribute directly.
4. Pension Contributions (Under the PRA 2014)
Managed by the National Pension Commission (PenCom) under the Pension Reform Act 2014, pension contributions are mandatory for employers with 15 or more employees.
Contribution Rate:
- Employer: 10% of of Monthly Emoluments.
- Employee: 8% of of Monthly Emoluments.
- Total: 18% of of Monthly Emoluments.
Monthly emoluments include basic salary + housing allowance + transport allowance.
5. Industrial Training Fund (ITF)
This fund supports workforce skill development and training.
Contribution Rate:
- Employer only: 1% of annual payroll
- Applies to companies with 5 or more employees or annual turnover of ₦50 million or more
6. Employees' Compensation Scheme (ECS)
Managed by the Nigeria Social Insurance Trust Fund (NSITF), the ECS provides compensation for employees injured, disabled, or deceased in the course of work.
Contribution Rate:
- Employer only: 1% of total monthly payroll