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The short answer
Nigeria's Labour Act requires wages to be paid in legal tender, and it does not mention foreign currency, so take Nigerian legal advice before paying salaries wholly in dollars. For tax, foreign-currency pay is converted to naira at the CBN rate when paid and PAYE is worked out on that naira figure. Many employers set pay in naira, or in naira with a dollar-linked review, which keeps payroll, pension and PAYE in one currency.
Lagos professionals often ask for dollar salaries, and South African employers often like the idea because their own budget is in hard currency. Before agreeing, look at three things: what Nigerian employment law says about the currency of wages, how payroll tax and pension work on a dollar salary, and the practical cost for both sides.
What the Labour Act says
Section 1 of the Labour Act requires wages to be paid in legal tender; payment by cheque or postal order is allowed only with the worker's prior written consent. The Act does not deal with foreign currency at all. Two further points matter:
- Section 91 defines a "worker" for the Act's purposes in a way that excludes people exercising administrative, executive, technical or professional functions. Many of the Lagos staff an SA company hires (engineers, analysts, managers) may fall outside the Act's wage rules, but their contracts still matter.
- Section 15 says wages are due at the end of each agreed period, at intervals of no more than one month.
Whether a dollar salary satisfies section 1 for staff the Act covers is a question for a Nigerian employment lawyer. We found no CBN or labour ministry statement on dollar salaries for staff working in Nigeria.
How PAYE works on a dollar salary
DLA Piper Africa's August 2026 payroll FAQ says employers convert foreign-currency pay to naira at the CBN rate at the time of payment and use that figure to determine PAYE and other statutory deductions. So a dollar salary does not avoid Nigerian payroll tax; it makes the naira figure, and the tax, move with the exchange rate.
A labelled example
Example only. The rate is an illustration, not today's. A Lagos developer is paid $1,500 a month. If the CBN rate on payday were ₦1,500 per dollar, the naira equivalent is ₦2,250,000 a month, or ₦27,000,000 a year. Using the 2026 bands in PwC's summary (reviewed May 2026), tax on ₦27,000,000 before pension and other reliefs is:
| Band | Rate | Tax |
|---|---|---|
| First ₦800,000 | 0% | ₦0 |
| Next ₦2,200,000 | 15% | ₦330,000 |
| Next ₦9,000,000 | 18% | ₦1,620,000 |
| Next ₦13,000,000 | 21% | ₦2,730,000 |
| Remaining ₦2,000,000 | 23% | ₦460,000 |
| Total | ₦5,140,000 |
Pension contributions are deducted before tax, so the real figure is lower; the point is that a 10% move in the rate moves this tax bill too. For the full bands, see Nigeria PAYE tax bands for 2026.
Pension and other deductions follow the naira figure
Pension contributions are a percentage of monthly emoluments (10% employer, 8% employee at minimum, per PenCom) and are remitted in naira. On a dollar salary, the naira base changes every month with the rate, which makes contributions and payslips harder to explain. See pension contributions for Nigerian staff.
Can the employee be paid into a dollar account?
Nigerian domiciliary accounts hold foreign currency. Reports of the CBN's 2026 foreign exchange manual say ordinary domiciliary account holders have unrestricted access to their balances (TheNigeriaLawyer, 2 June 2026). That is about the account, not about whether a Nigerian employer may pay wages in dollars; the employment law question above still applies.
Drafting a dollar-linked review
If you choose naira pay with a dollar reference, the clause decides whether it works. Spell out: the reference dollar figure; the rate source and the date it is read; how often the review happens; whether pay can go down as well as up; and any band within which no change is made. State that the adjusted figure is a naira salary for all purposes, including PAYE and pension. Keep a record of each review calculation with the payslips, so the figures can be explained to the employee, an auditor or the tax authority later.
The options compared
| Option | For the employee | For the employer |
|---|---|---|
| Naira salary | Local currency, simple payslip; loses value if the naira weakens | Payroll, PAYE and pension in one currency; rand cost moves with the rate |
| Naira salary with a dollar-linked review | Naira pay, adjusted at agreed points by reference to a dollar figure | Predictable payroll between reviews; review clause must be clear |
| Dollar salary | Protection against naira weakness | Legal question under s.1; PAYE and pension recalculated monthly at the CBN rate |
| Split (naira base plus dollar allowance) | Partial protection | Both currencies to run; same legal and tax questions for the dollar part |
Whichever you choose, the employer running payroll in Nigeria (your subsidiary or an employer of record) does the conversion and deductions. See Nigerian PAYE for staff of an SA firm.
Where Pryme fits
A Nigerian employer with a Pryme Business Account can hold USD and NGN side by side (business multicurrency) and run naira payroll. Swap converts only when you choose, with the rate shown first and the fee on its own line. Outside Nigeria, Pryme's activities are carried out through regulated partners.
Questions people ask
Is it legal to pay Nigerian staff in dollars?
The Labour Act requires wages in legal tender and is silent on foreign currency. Take Nigerian legal advice; many employers pay in naira or naira with a dollar-linked review.
How is PAYE calculated on a dollar salary in Nigeria?
The pay is converted to naira at the CBN rate when paid, and PAYE is calculated on the naira amount, per DLA Piper Africa (August 2026).
Does the Labour Act cover professional staff?
Its definition of worker excludes people in administrative, executive, technical or professional roles, but their employment contracts still govern pay.
Can staff be paid into a domiciliary account?
The account can hold dollars, but that does not settle whether the employer may pay wages in dollars.
Sources
- Labour Act (Nigeria), full text · accessed Oct 2026
- DLA Piper Africa, FAQs on payroll taxes and employer liability (28 August 2026) · accessed Oct 2026
- PwC Worldwide Tax Summaries, Nigeria: Taxes on personal income (reviewed 29 May 2026) · accessed Oct 2026
- PenCom, Frequently asked questions 2023 · accessed Oct 2026
- TheNigeriaLawyer, CBN grants domiciliary account holders unrestricted access (2 June 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.