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The short answer
When Nigerian inflation runs far above the UK's (14.63% against 3.5% in September 2026), a single yearly rise set in London can leave Lagos staff worse off in real terms within months. UK firms usually choose between matching the NBS inflation rate, a fixed rise plus a mid-year check, linking part of pay to a foreign currency, or reviewing twice a year; whichever you choose, write it down and tell staff in writing within a month of any change.
The numbers behind the problem
The National Bureau of Statistics (NBS) put Nigeria's headline inflation at 14.63% year on year in September 2026, down from 15.39% in August, with food inflation at 19.59% (figures released on 15 October and reported by Voice of Nigeria on 16 October 2026). The ONS put UK CPI inflation at 3.5% for the same month. A pay budget built around UK expectations will therefore lose value much faster in Lagos.
The Nigeria library explains how the index works, including its 2025 rebasing, in how Nigeria measures inflation. Check the NBS release for the latest month before you set any rise, because the rate has been moving.
Worked example: what a rise is worth
This is an example only, with a made-up salary. An analyst earns ₦500,000 a month, and inflation over the year is 14.63%.
| Rise given | New monthly pay | Real change after 14.63% inflation |
|---|---|---|
| 0% | ₦500,000 | -12.8% |
| 10% | ₦550,000 | -4.0% |
| 14.63% (match) | ₦573,150 | 0% |
| 20% | ₦600,000 | +4.7% |
The real change is the new pay divided by 1.1463, compared with the old pay. A 10% rise sounds generous in London; in Lagos it is a 4% cut in what the salary buys. Food prices, which rose 19.59% in the year to September, weigh more heavily on lower-paid staff than the headline rate suggests.
Five approaches UK firms use
1. Match the published inflation rate
Raise pay by the latest NBS headline rate each year. It is simple and easy to explain. The cost is high and unpredictable, and it ignores performance.
2. A fixed rise plus a mid-year check
Set a yearly rise, then review at six months and top up if inflation has run well above what you assumed. This spreads the cost and keeps staff from waiting a full year.
3. Review twice a year
Some firms with Lagos teams move to six-monthly reviews when inflation is high, with smaller rises each time. It keeps pay closer to prices but doubles the admin.
4. Link part of pay to a foreign currency
Pay part of salary as a fixed pound or dollar amount converted at each payroll date. This protects staff against naira falls, which often drive inflation, but it moves currency risk onto your budget and raises the legal points in salary in naira or dollars.
5. A band system with inflation as one input
Set salary bands per level, move the bands by a figure that considers inflation and market data, and place people within bands by performance. It takes more work but gives the most consistent outcomes as the team grows. Market data is covered in salary benchmarks for Lagos tech staff.
The legal side of a change
Section 7(1) of the Labour Act requires written terms that include the rate of pay, and section 7(2) requires any change to those terms to be notified to the worker in writing within one month. Even where a role falls outside the Act's definition of worker, a written letter confirming the new pay, the date it starts and how it was set is the record you will want. Rises also change PAYE: under the 2025 bands, pay above ₦12 million a year is taxed at 21% on the slice in that band, so a rise can cost staff more tax than they expect.
Explaining the decision to staff
How you explain a rise matters almost as much as its size. Staff in Lagos see prices every week; a letter that ignores inflation reads as if you have not noticed. Say which approach you used, which inflation figure you looked at and for which month, and when the next review will be. If the budget does not stretch to a full inflation match, say so plainly and explain what else you are doing, such as a mid-year check or a one-off payment. Avoid promising to match inflation every year unless you can keep that promise when the rate jumps. Where staff are paid through an employer of record, agree the wording with them so the letter matches the payslip. Finally, keep a copy of every letter with the date it was sent, because section 7(2) of the Labour Act ties the notice to the change.
Steps for this year's review
- Take the latest NBS headline and food inflation rates and note the month.
- Decide your approach and the budget it implies for the whole team.
- Check each person against your salary band and market data.
- Model take-home pay after PAYE for each proposed rise.
- Confirm each change in writing, with the effective date, within one month.
- Diary the next review date and stick to it.
Where Pryme fits
If you pay Lagos salaries from sterling, the cost of each rise also depends on the exchange rate on the day. A Pryme Business Account lets you hold naira you have already converted with Swap, with the rate and the fee shown before you approve, and run payroll from that balance. The Finance agent can prepare the revised payroll for a person to approve.
Questions people ask
What is Nigeria's inflation rate now?
The NBS put headline inflation at 14.63% year on year in September 2026, with food at 19.59%. Check the NBS for the latest month.
Should I match inflation for Nigerian staff?
It is one option. Matching keeps real pay level but costs more; many firms combine a fixed rise with a mid-year check.
Do I have to tell Nigerian staff about a pay change in writing?
Section 7(2) of the Labour Act requires changes to written terms to be notified in writing within one month.
How often should I review Lagos salaries?
At least yearly. When inflation is high, some firms review every six months.
Sources
- Voice of Nigeria: Nigeria's headline inflation drops to 14.63 per cent (NBS CPI September 2026, 16 Oct 2026) · accessed Oct 2026
- ONS: Inflation and price indices (CPI September 2026, released 21 Oct 2026) · accessed Oct 2026
- Labour Act Cap L1, Laws of the Federation of Nigeria 2004 (PLAC copy) · accessed Oct 2026
- DLA Piper Africa: FAQs on payroll taxes and employer liability in Nigeria (28 Aug 2026) · accessed Oct 2026
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