AI agents for business finance: what they can and can't do
What AI agents can do in bookkeeping, close, collections and compliance today, where a person must stay in charge, and how to judge a product.
Part of the guideRunning payroll in Nigeria, Ghana and Kenya: an employer's guide
The short answer
Beyond PAYE and pension, Nigerian payroll carries three more charges. The National Housing Fund (NHF) is 2.5% of the employee's monthly pay and is now voluntary for private sector staff; the NSITF employees' compensation contribution is 1% of total monthly payroll, paid by the employer by the end of the month; and the Industrial Training Fund (ITF) levy is 1% of total annual payroll, paid by the employer by 1 April. Late NSITF and ITF payments carry a penalty of 5% a month.
Tax and pension get most of the attention, but three smaller charges catch out a lot of Nigerian employers: one deducted from staff, two paid by the business. They are easy to forget because two of them are not monthly deductions on a payslip and one has recently changed. This article explains each and shows the cost for a typical small company. For tax, pension and the Ghana and Kenya rules, see the full payroll guide for Nigeria, Ghana and Kenya.
The three charges side by side
| NHF | NSITF (employees' compensation) | ITF | |
|---|---|---|---|
| Who bears it | Employee | Employer | Employer |
| Rate | 2.5% of monthly pay (sources differ on the base) | 1% of total monthly payroll | 1% of total annual payroll |
| Paid to | Federal Mortgage Bank of Nigeria | Nigeria Social Insurance Trust Fund | Industrial Training Fund |
| When | Within one month of deduction | By the end of the month in which salaries are paid | By 1 April for the previous year |
| Who is covered | Public sector compulsory; private sector voluntary | All employers | Most sources: 5 or more staff, or turnover of ₦50 million or more (one guide says 25 staff) |
| Late penalty | Check with FMBN | 5% a month on the unpaid amount | 5% a month on the unpaid amount |
National Housing Fund (NHF)
The NHF is a savings scheme run by the Federal Mortgage Bank of Nigeria. Contributors can later apply for mortgage loans from the Fund. The contribution is 2.5% of the employee's monthly pay, deducted by the employer and remitted within one month. Sources describe the base differently: PwC refers to monthly income, while DLA Piper refers to basic salary. Confirm with the Federal Mortgage Bank of Nigeria which base it applies before you set up the deduction.
The important change is that private sector employees are no longer compelled to contribute. Advisers reviewing the 2026 tax reforms recommend that private employers stop NHF deductions unless the employee consents. Public sector employees must still contribute.
Some employees will still want to contribute, particularly those planning to buy a home and hoping to use an NHF mortgage. Others will prefer the extra take-home pay. The employer's job is not to advise either way but to record the choice clearly and apply it consistently from the next payroll.
What employers should do
- Ask each private sector employee, in writing, whether they want to contribute, and keep the answer on file.
- Stop deducting for anyone who has not opted in, and start deducting only from the month after consent is given.
- Remember that NHF contributions are an allowable deduction for income tax, so they reduce taxable income for those who opt in.
- Revisit each employee's choice once a year, or when they ask.
NSITF employees' compensation
Under the Employees' Compensation Act, every employer pays 1% of its total monthly payroll into the Employees' Compensation Scheme run by the Nigeria Social Insurance Trust Fund. Nothing is deducted from staff. The scheme compensates employees for workplace injuries, occupational diseases, mental stress arising from work and death in service.
Contributions are due by the last day of the month in which salaries are paid, and late payment attracts a penalty of 5% a month on the unpaid amount. Registration, monthly payments and the NSITF Certificate of Compliance are handled through NSITF's employer self-service portal. A current compliance certificate is often requested in government and corporate tenders, so a lapse can cost contracts as well as penalties.
Industrial Training Fund (ITF)
The ITF levy funds skills training. Most published sources say employers with five or more employees, or with annual turnover of ₦50 million or more, pay 1% of their total annual payroll, though at least one employer guide puts the staff threshold at 25. If you are near either line, check the Industrial Training Fund Act or ask the ITF directly. It is an annual payment, due on or before 1 April for the previous year, with a penalty of 5% a month on any amount still unpaid.
Compliant employers that train their staff can apply to reclaim up to 50% of the levy paid, subject to ITF approval. Because the bill arrives once a year, the safest approach is to accrue 1% of payroll every month so the money is ready in March.
Worked example: a 20-person company
A Lagos company has 20 employees and a total monthly payroll of ₦8,000,000, or ₦96,000,000 a year. Twelve employees have opted into NHF, with average monthly pay for NHF purposes of ₦200,000.
| Charge | Calculation | Amount | Due |
|---|---|---|---|
| NHF (12 staff) | 12 × 2.5% × ₦200,000 | ₦60,000 a month, deducted from pay | Within one month |
| NSITF | 1% × ₦8,000,000 | ₦80,000 a month, employer cost | End of the same month |
| ITF | 1% × ₦96,000,000 | ₦960,000 a year, employer cost | 1 April the following year |
| ITF accrual | ₦960,000 ÷ 12 | ₦80,000 a month set aside | |
| Possible ITF reimbursement | Up to 50% × ₦960,000 | Up to ₦480,000 | Subject to ITF approval |
Together, NSITF and ITF add 2% to the payroll bill, or ₦160,000 a month in this example. If the NSITF payment for one month were paid three months late, the penalty would be ₦4,000 for each month of default. If the ITF levy were paid three months late, the penalty would be ₦48,000 a month.
These charges sit on top of the employer's pension contribution, covered in our article on pension contributions in Nigeria, and the PAYE explained in the 2026 PAYE bands article.
Where employers go wrong
- Still deducting NHF from everyone. Deducting from a private sector employee who has not consented risks being treated as an unauthorised deduction from wages. Stop it and take advice on refunds.
- Forgetting the ITF until April. A ₦960,000 bill that was never accrued can strain cash flow in the first quarter, when many businesses are also settling annual returns.
- Paying NSITF on part of the payroll. The 1% applies to total monthly payroll, not only to permanent staff on the main payroll.
- Letting the NSITF compliance certificate lapse. It is renewed through the portal and is often needed for tenders.
- Not claiming the ITF reimbursement. Employers that run qualifying training and keep records can recover up to half the levy, but only if they apply.
Where Pryme fits
Pryme payroll covers Nigeria, where Naira deposits are held by Solid Allianze Microfinance Bank Ltd, licensed by the CBN and insured by the NDIC up to the applicable limit. Above a threshold you set, a second named approver must sign off before money moves, and Finance and Compliance agents, built and certified by Pryme Intelligence, a separate company, prepare the work inside a mandate you set; nothing moves without approval, above the mandate's ceiling a person decides, and each step sits on an audit trail. The habits in this article stay with you as employer: record each NHF choice, accrue 1% of payroll a month for the ITF, and pay NSITF by month end. The employer's payroll guide has the complete checklist.
Questions people ask
Is NHF deduction compulsory in Nigeria in 2026?
Not for private sector employees, who may choose whether to contribute 2.5% of their pay. It remains compulsory for public sector employees.
How much is NSITF contribution in Nigeria?
1% of the employer's total monthly payroll, paid by the employer and not deducted from staff. It is due by the end of the month in which salaries are paid.
Who pays the ITF levy?
Most sources say employers with five or more employees, or annual turnover of ₦50 million or more, though one employer guide says 25 or more employees; confirm with the ITF if you are near the line. The levy is 1% of total annual payroll, due by 1 April.
Can I get my ITF levy back?
Compliant employers that train their staff can apply to reclaim up to 50% of the levy paid. Reimbursement is subject to ITF approval.
What is the penalty for late NSITF or ITF payment?
5% a month on the unpaid amount for each month the payment is late.
Sources
- PwC Worldwide Tax Summaries: Nigeria, individual, other taxes · accessed Oct 2026
- DLA Piper Africa: FAQs on payroll taxes and employer liability (Nigeria, 2026) · accessed Oct 2026
- BusinessDay: Regulatory compliance requirements for companies operating in Nigeria · accessed Oct 2026
- NSITF: Employer services · accessed Oct 2026
- Topsource Worldwide: Employer of record in Nigeria · accessed Oct 2026
- Afrotools: Nigeria employer payroll compliance 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.