Nigeria payroll and benefits guide
What global businesses need to know about payroll in Nigeria
Nigeria is one of Africa’s biggest economic success stories in recent years. Its GDP in 2014 was ten times the size it was in 1999, and while that growth hasn’t continued, it rivals Egypt and South Africa as the biggest economy on the continent.
A major factor in this growth has been a rapidly growing population that is getting bigger all the time. Nigeria’s population is now more than 235 million, having grown by nearly 25% in just ten years, and nearly 70% of the population is under the age of 30. This means there is a large, motivated workforce that is growing continuously. For companies looking to expand, Nigeria’s development goals and desire to improve infrastructure and quality of living make it an excellent time to invest in the country’s abundant human capital.
Nigeria’s economy is a healthy mix of services, heavy industry and agriculture, although issues around consistent power supplies and corruption mean it’s important to understand the country’s cultural specifics before you start an expansion there. As you’ll read in this guide to running payroll in Nigeria, many rules are subject to regular changes, while collective bargaining also has a strong influence.
Getting started
While Nigeria is relatively open to foreign investment, there are different rules and regulations in place for different industries. For example, if setting up a private limited company, the minimum share capital requirements vary substantially from one sector to another—especially in financial services, aviation, healthcare, shipping and agriculture.
When registering a business in Nigeria, you’ll need to deal with the Corporate Affairs Commission (CAC). Through their helpful online portal, you can check for availability of your chosen company name, complete the registration process and upload relevant documents, and pay the required filing and stamp duty fees. Your Certificate of Registration can be issued to you electronically through this portal. The costs of doing so are relatively small, and the whole process takes around five working days, including uploaded documents being reviewed.
You will also need to register with the Federal Inland Revenue Service (FIRS) to obtain a Tax Identification Number, which is a free process but a legal requirement. With the TIN and Certificate of Registration, a business bank account can then be opened. You may also be required to obtain a business license in the state (or states) that you plan to operate in.
Employment considerations in Nigeria
Written employment contracts are legally required for manual and clerical workers, who should receive their contract within three months after starting employment. While written contracts aren’t mandatory for other workers, it’s good practice to provide them anyway.
The standard working day in Nigeria is eight hours; some employees will work five days a week and others will work six. Employees are entitled to receive overtime pay, but there is no legal definition of how much they should receive, which means overtime rates are up for negotiation in contracts or through collective bargaining.
There is no legal requirement for a probationary period, although most businesses will provide one of between three and six months in length. Notice periods start at one day, rising to one week after three months’ service, two weeks after two years, and one month after five years.
Compensation, bonuses and severance in Nigeria
Nigeria’s minimum wage has risen consistently and substantially in recent years. The rate for 2025 is NGN 70,000 per month (approx. £35; $45; €40), which is almost four times the rate of 2018. However, some individual states have set their own higher rates: for example public-sector workers in Oyo and Akwa Ibom states are entitled to at least NGN 80,000 per month.
Employees can be paid every month, every two weeks or every week, but they should be paid at least once a month as a minimum. A 13th-month salary payment is not required, although the payment of discretionary bonuses are common. It’s also fairly common for employees to receive additional benefits as part of their pay package, including transport, housing and food allowances; health insurance; and additional maternity and/or paternity leave.
Severance pay is mandatory for clerical and manual workers; there is no fixed entitlement, and this should be agreed in employment contracts or through collective bargaining.
Tax and withholding considerations in Nigeria
Nigeria’s income tax system, in line with many countries around the world, is progressive and levies higher tax rates on higher earnings. There are six bands, with the lowest of 7% applying to the first NGN 300,000 earned each year (approx. £140; $185; €165). Further bands of 11%, 15%, 19% and 21% then kick in, before the highest rate of 24% is applied on all earnings above NGN 3.2 million per year (approx. £1500; $2000; €1750).
There are four types of social security contributions in Nigeria, but the rates for them are relatively low:
- Pension: 10% employer (if the workforce has more than 15 employees); 8% employee
- National Social Insurance Trust Fund: 1% employer
- Industrial Training Fund: 1% employer
- Housing Fund: 2.5% employee
Nigeria has a relatively low VAT rate of 7.5%, but a high corporation tax rate of 30% applies to businesses turning over more than NGN 100 million per year (approx. £46,500; $62,500; €54,500).
Holiday and leave considerations in Nigeria
There are normally around 11 days of public holidays each year, six of which are on fixed dates. The others are moveable religious festivals, either for Easter or for Muslim celebrations. Authorities will often declare public holidays at very short notice—as was the case at Easter 2025, when Good Friday and Easter Monday were only officially announced as public holidays on the Tuesday of that week. Employees should be paid as normal for their time off on these 11 days.
Paid leave entitlement in Nigeria is very low at just six days a year, although apprentices and workers under the age of 16 should receive 12 days per year. Unused leave can be carried over to the following year with employer’s consent.
Sick leave is paid in full by employers for a maximum of 12 days per year, in cases of medically certified absence. Maternity leave in the private sector is 12 weeks, six weeks either side of the due date, paid by employers at half their normal salary rate (assuming they have at least six months service); public-sector employees get 16 weeks at full pay. Nigeria introduced two weeks’ paid paternity leave in November 2022, but this is only for public-sector workers at present.
Payroll in Nigeria: a summary
With the young Nigerian workforce growing by millions every year, this is the perfect opportunity to get involved in one of the fastest-changing business environments on the planet. But this is likely to mean several regulatory changes from a payroll perspective in the future, such as further increases to the minimum wage. In order to keep on the right side of compliance, and ensure your workforce get the pay experience they expect and deserve, working with a global payroll partner can be invaluable.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.
Click here to see more country payroll guides from CloudPay.
