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The short answer
The National Housing Fund contribution is 2.5% of an employee's monthly salary or income, deducted by the employer and remitted to the Federal Mortgage Bank of Nigeria. Since the Business Facilitation Act amended the NHF Act in 2023, contributions are compulsory only for public-sector employees earning at least the national minimum wage and for self-employed people; private-sector employees may contribute voluntarily, so a UK-owned private company deducts NHF only for staff who opt in.
Many Nigerian payroll templates still show NHF as a standard 2.5% deduction for everyone. For a private company, including a UK-owned Lagos subsidiary, that is out of date. The rate has not changed; who must pay has.
The rate and the base
The 2.5% figure is consistent across sources, but they describe the base differently. FMBN's own NHF FAQ describes the contribution as 2.5% of monthly gross salary or income. LawCare Nigeria's 2024 overview describes it as 2.5% of basic monthly salary. Templars' note on the amendment refers to 2.5% of monthly income. Agree the base in writing with any employee who contributes, and apply it consistently.
Compulsory or voluntary?
Templars explains that section 45 of the Business Facilitation Act 2022 (signed in February 2023) amended the NHF Act so that compulsory contribution applies only to public-sector employees earning the national minimum wage or more, and to self-employed persons. Private-sector employees may contribute voluntarily at 2.5% of monthly income. Where an employee does contribute, the employer deducts and remits under section 9 of the NHF Act.
| Staff type | NHF position after the 2023 amendment (per Templars) |
|---|---|
| Public-sector employee on minimum wage or more | Compulsory |
| Self-employed person | Compulsory |
| Private-sector employee (including a UK-owned Nigerian company) | Voluntary |
Why an employee might opt in
- Mortgage access. FMBN's NHF mortgage page says contributors can borrow through accredited primary mortgage banks after six months of continuous contributions.
- Tax relief. Under the Nigeria Tax Act 2025, NHF contributions are deductible in working out taxable employment income, as a January 2026 Mondaq note explains.
- Refund. Templars notes the Act provides for a refund to a contributor without a housing loan at 60 or on retirement, with interest at a rate the Minister prescribes.
If staff opt in: the employer's steps
- Get the employee's written election to contribute and the base you will use.
- Register as an employer with FMBN; LawCare describes form NHF1 for employers and NHF2 for contributors.
- Deduct 2.5% each month and remit to FMBN with a schedule.
- Show NHF separately on the payslip and keep remittance evidence.
- Claim the deduction when calculating PAYE (see PAYE for Lagos staff).
Worked example
Example only. An employee with monthly basic pay of ₦300,000 and gross pay of ₦500,000 opts in. On a basic-pay base, NHF is 2.5% × ₦300,000 = ₦7,500 a month, ₦90,000 a year. On a gross base it is 2.5% × ₦500,000 = ₦12,500 a month, ₦150,000 a year. The choice of base changes the deduction by ₦60,000 a year, which is why it should be agreed in writing.
Staff abroad and the diaspora mortgage
NHF is not only for people at home. FMBN launched an NHF Diaspora Mortgage in London on 7 August 2026, describing loans of up to ₦100 million subject to affordability, at 9% a year, with a maximum tenor of ten years, and saying contributions and KYC can be done remotely. If you employ Nigerians in the UK who ask whether they can contribute, point them to FMBN's own pages; that is a personal decision, separate from your Lagos payroll.
Explaining the change to staff
Staff who moved from a public-sector or older private employer may expect NHF to appear on their payslip, or may assume it is still compulsory. A short note at onboarding avoids confusion:
- NHF is voluntary for employees of this company, at 2.5% if you choose to contribute.
- If you opt in, the company deducts and remits it to FMBN each month and shows it on your payslip.
- Contributions reduce your taxable income under the Nigeria Tax Act 2025.
- You can ask for your contribution record at any time, and you should check it with FMBN once a year.
Keep each employee's signed choice on file. If someone opts out later, record the date and stop the deduction from the next payroll.
Common mistakes
- Deducting NHF from every private-sector employee by default, using an old template.
- Deducting but not remitting, which leaves the employee with no record at FMBN.
- Forgetting the PAYE deduction for contributors.
- Changing the base mid-year without telling staff.
- Not registering the company with FMBN before the first opted-in deduction, so remittances have no employer record to sit against.
- Losing track of contributions for staff who leave; give them a statement of what was deducted and remitted.
For the other payroll lines, see NSITF and ITF and a Nigerian payslip template.
Where Pryme fits
If you pay Lagos staff through Pryme payroll, voluntary deductions such as NHF can be set per employee, so opted-in staff are deducted and others are not. Staff with a Pryme Personal Account can save towards a home deposit in naira in Savings Boxes (Boxes), with rates shown in the app.
Questions people ask
Is NHF deduction compulsory for private company staff?
No. Since the Business Facilitation Act amendment signed in February 2023, private-sector employees contribute voluntarily, per Templars.
What is the NHF rate?
2.5% of monthly salary or income. FMBN describes the base as gross salary or income; some guides use basic salary.
Who must still pay NHF?
Public-sector employees earning the national minimum wage or more, and self-employed people.
Is NHF tax-deductible?
Yes. Under the Nigeria Tax Act 2025, NHF contributions are deductible from employment income, per a January 2026 Mondaq note.
Sources
- Templars: Amendment of the National Housing Fund Act and contribution into the NHF (12 Apr 2023) · accessed Oct 2026
- FMBN: NHF scheme FAQs · accessed Oct 2026
- LawCare Nigeria: Overview of the National Housing Fund scheme (17 Oct 2024) · accessed Oct 2026
- Mondaq (Adeola Oyinlade & Co): Personal income tax under the Nigeria Tax Act 2025 (5 Jan 2026) · accessed Oct 2026
- FMBN: NHF Mortgage Loan · accessed Oct 2026
- FMBN: FMBN opens secure pathway for Nigerians abroad, Diaspora Mortgage launch (8 Aug 2026) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.