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The short answer
Paying a Nigerian contractor in US dollars from the UK is generally lawful: the money is a payment from abroad, and a Nigerian resident can hold and receive foreign currency in a domiciliary account. The CBN's FX rules restrict how dollars are used between Nigerian entities inside Nigeria, which mostly must price and settle in naira, so the risk sits in local arrangements and in employee wages, not in a contractor invoice paid from outside.
The short version
Two different rules get mixed up. One is about money coming into Nigeria from abroad, which Nigerian residents can receive in foreign currency through a domiciliary account. The other is about transactions between Nigerian entities inside Nigeria, which the Central Bank of Nigeria (CBN) expects to be priced and settled in naira. A UK company paying a Lagos contractor from a UK account sits in the first group.
The CBN's Foreign Exchange Manual, fourth edition, took effect on 1 June 2026. Reports of it by TheCable (3 June 2026) and Pavestones Legal on Mondaq (24 June 2026) describe the points below. We have relied on those summaries; the CBN's own document is the final word.
What the 2026 FX Manual says, as reported
- Domiciliary accounts: no source-of-funds disclosure is needed to open or fund one (TheCable).
- Pricing: Nigerian entities are to price and settle transactions in naira, with sector exemptions (TheCable). This is aimed at domestic transactions, such as a Lagos landlord quoting rent in dollars.
- Moving money out: Form A is no longer needed for outward remittances funded from the holder's own domiciliary account, and direct transfers of up to US$10,000 a day are possible without extensive trade documents (Pavestones).
- Penalties: falsified FX documents can carry up to five years' imprisonment or a fine of up to five times the value for individuals, and up to ten times for companies (TheCable).
None of these points stops a contractor resident in Nigeria from being paid in dollars by a client abroad. They do shape what the contractor can then do with the money, and they are a reason not to set up dollar arrangements between two Nigerian parties on your behalf.
Contractors versus employees
The answer changes if the person is really your employee. Section 1 of the Labour Act says a worker's wages are payable in legal tender, which in Nigeria is the naira, with cheques or postal orders only with the worker's prior written consent. That rule is written for wages, not for a self-employed contractor's invoice. If you pay someone who works like an employee in dollars, you are closer to the wages rule, and to PAYE, than to a contractor arrangement.
The choice between naira and dollar salaries for staff is covered in salary in naira or dollars.
How the money arrives matters
Not every channel will deliver dollars. Some money transfer services pay out in Nigeria only in naira: Sendwave's Nigeria page, read in October 2026, says US dollar payouts are no longer allowed and cites the CBN. A business transfer into a named domiciliary account at a Nigerian bank is a different route. Before you agree a currency with a contractor, check:
- Whether the contractor has a domiciliary account in the currency you will send, in their own name or their business's name.
- Whether your sending service delivers dollars to that account or converts to naira on arrival.
- Who bears the conversion cost if it is converted, and at what rate.
- What payment reference the contractor's bank wants, so the inflow is not queried.
Tax on the contractor's side
A Nigerian resident is taxed on worldwide income, including overseas freelance income, and the self-employed file an annual self-assessment with the tax authority of the state where they live (BusinessDay, 12 January 2026, on the Nigeria Tax Act 2025). Paying in dollars does not change that. It is the contractor's filing, not yours, but a clear invoice and payment record helps them. The Nigeria library covers it in tax on Nigerian freelancers' dollar income.
When the contractor trades through a Nigerian company
Many Lagos contractors invoice through their own registered company. The same principle applies: your payment comes from abroad, and the company can receive it into a domiciliary account in its own name. Three things change in practice. The invoice, the contract and the receiving account should all be in the company's name, not the director's. The company, not the individual, reports the income to the Nigerian tax authority. And because exported services are zero-rated for Nigerian VAT under the 2025 Act, the invoice should not normally carry 7.5% VAT; the invoice side is covered in invoices you need from a Nigerian contractor.
Worked example: who carries the conversion
This is an example only, with a made-up rate. A contract says US$1,000 a month. If the money arrives in the contractor's domiciliary account as dollars, they receive US$1,000 less any receiving bank charge and choose when to convert. If your channel converts on arrival at, say, ₦1,500 to the dollar while the contractor could have sold at ₦1,520, they receive ₦1,500,000 instead of ₦1,520,000, a ₦20,000 difference that month. Agree in the contract who bears conversion and bank charges, so neither side is surprised.
What to check first
- The person is a contractor in practice, with a written contractor agreement.
- The invoice is in the currency you will pay, with the contractor's account details.
- You are paying from outside Nigeria, not through a Nigerian intermediary settling in dollars.
- You keep the invoice, the payment confirmation and the rate used, for your own accounts.
Where Pryme fits
A Pryme Business Account holds USD, GBP, EUR and NGN with local account details for each, and can be opened from the UK. You can pay a contractor in naira through Send or convert first with Swap, where the rate and the fee are shown before you approve. For a team of contractors, bulk payouts sends one approved batch. Outside Nigeria, Pryme's services are provided through regulated partners.
Questions people ask
Is it legal to pay a Nigerian freelancer in dollars?
Generally yes, when the payment comes from abroad into the freelancer's domiciliary account. The CBN's naira pricing rule is aimed at transactions between Nigerian entities inside Nigeria.
Can Nigerian employees be paid in dollars?
The Labour Act says wages are payable in legal tender, which is the naira. Paying employees in dollars raises that rule and PAYE questions; take advice before doing it.
Will my contractor receive dollars or naira?
It depends on the channel. Some transfer services pay Nigeria only in naira; a bank transfer to a domiciliary account can arrive in dollars. Ask before you agree the currency.
Does the contractor need Form A to move the dollars on?
Reports of the 2026 FX Manual say Form A is no longer needed for outward remittances funded from the holder's own domiciliary account. Their bank will confirm what it asks for.
Sources
- TheCable: CBN foreign exchange manual 2026, key changes (3 Jun 2026) · accessed Oct 2026
- Mondaq (Pavestones Legal): Key regulatory update, the CBN Foreign Exchange Manual 2026 (24 Jun 2026) · accessed Oct 2026
- Labour Act Cap L1, Laws of the Federation of Nigeria 2004 (PLAC copy) · accessed Oct 2026
- Sendwave: Send money to Nigeria (Nigeria payout page) · accessed Oct 2026
- BusinessDay: Explainer on personal income tax under the Nigeria Tax Act 2025 (12 Jan 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.