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The short answer
A bonus paid to an employee in Nigeria is employment income taxed through PAYE, whether it is paid in naira or dollars. Under the 2025 tax laws, foreign-currency pay is converted at the CBN official rate when paid, PAYE is due to the state tax authority by the 10th of the following month, and failing to deduct carries a 40% penalty; separately, the Labour Act says wages are payable in legal tender, so dollar payments to employees need care.
Bonuses are taxable pay
DLA Piper Africa's payroll FAQ (28 August 2026), written on the Nigeria Tax Act 2025 and the Nigeria Tax Administration Act 2025, which took effect on 1 January 2026, makes three points that decide how a dollar bonus is handled:
- Bonuses and 13th-month payments are taxable employment income.
- Pay in a foreign currency is converted to naira at the CBN official rate at the time it is paid, for PAYE.
- An employer that fails to deduct PAYE faces a 40% penalty, and one that fails to remit faces 10% plus interest.
PwC's summary of the Deduction at Source Regulations 2024 gives the PAYE remittance date as the 10th of the following month, to the State Internal Revenue Service. The full payroll position for a UK company is in PAYE for Nigeria staff.
Worked example: tax on a dollar bonus
This is an example only. The exchange rate is invented; use the CBN official rate on the payment date. An engineer earns ₦15,000,000 a year and receives a US$2,000 bonus, converted at an example ₦1,500 to the dollar.
| Step | Figure |
|---|---|
| Bonus in naira | US$2,000 × ₦1,500 = ₦3,000,000 |
| Annual pay with bonus | ₦18,000,000 |
| Band the bonus falls in | ₦12m to ₦25m, taxed at 21% |
| Extra tax on the bonus | ₦3,000,000 × 21% = ₦630,000 |
| Bonus after tax | ₦2,370,000 |
The bands under the 2025 Act are 0% on the first ₦800,000, then 15%, 18%, 21%, 23% and 25% above ₦50 million (DLA Piper). Because the whole bonus sits in the 21% band here, the marginal calculation is simple; a bigger bonus can cross into the 23% band. The Nigeria library has the band table in Nigeria PAYE bands for 2026.
The wages-in-legal-tender rule
Section 1(1)(a) of the Labour Act says a worker's wages are payable in legal tender, and section 1(3) allows a cheque or postal order only with the worker's prior written consent. Nigeria's legal tender is the naira. Whether a bonus counts as wages, and whether the person is a worker under section 91 (which excludes administrative, executive, technical and professional roles), affects how much weight this rule carries for your team. The safest pattern for employees is to set the bonus in dollars but pay it in naira through payroll at the rate on the day, with PAYE deducted.
Designing the bonus
Before the tax and currency questions, decide what the bonus is. A guaranteed bonus, such as a 13th-month payment written into the contract, is part of the pay package and should appear in the written terms that section 7 of the Labour Act requires. A discretionary bonus, paid for results, should say in writing that it is discretionary and how it is decided, so staff do not treat one good year as a promise. Set the bonus in the currency that matches your budget, and say in the bonus letter which exchange rate will apply if it is paid in naira, for example the CBN official rate on the payroll date. Time the payment with your normal payroll run so that PAYE is deducted and remitted on the usual cycle, rather than in a separate transfer that is easy to forget. Retention bonuses, paid only if someone stays to a date, are covered in retaining Lagos staff.
The FX side
If you do pay dollars into an employee's domiciliary account, note that reports of the CBN's 2026 FX Manual say Nigerian entities should price and settle in naira, with sector exemptions (TheCable, 3 June 2026). A UK employer paying from abroad is not a Nigerian entity, but a Nigerian employer of record or subsidiary is. If your staff are employed through a local entity, ask it how it handles bonus currency.
Contractors
A bonus to a self-employed contractor is simply extra fees. You do not run PAYE, and the contractor declares it in their own self-assessment. Invoice it like any other fee, as set out in invoices you need from a contractor. Paying a large "bonus" to someone who works like an employee can strengthen an argument that they are one.
Steps before paying
- Confirm whether each person is an employee or a contractor.
- For employees, put the bonus through the payroll run, converted at the CBN official rate on the payment date.
- Deduct PAYE and remit it by the 10th of the following month.
- Give the employee a payslip showing the bonus and the tax.
- Keep the rate used and the payment record.
Where Pryme fits
A Pryme Business Account can hold the dollars or pounds you set the bonus in and convert to naira with Swap, showing the rate and the fee before you approve. The Finance agent can add bonus lines to the payroll run for a person to approve.
Questions people ask
Are bonuses taxed in Nigeria?
Yes. Bonuses and 13th-month pay are taxable employment income under the 2025 tax laws, deducted through PAYE.
What exchange rate is used for PAYE on a dollar bonus?
DLA Piper's FAQ says foreign-currency pay is converted at the CBN official rate at the time it is paid.
When is PAYE on a bonus due?
By the 10th of the following month to the State Internal Revenue Service, per PwC's summary of the 2024 Regulations.
Can I pay a Nigerian employee's bonus in dollars?
The Labour Act says wages are payable in legal tender, the naira. Many employers set the bonus in dollars but pay it in naira through payroll.
Sources
- DLA Piper Africa: FAQs on payroll taxes and employer liability in Nigeria (28 Aug 2026) · accessed Oct 2026
- PwC Nigeria: Highlights of the Deduction of Tax at Source (Withholding) Regulations 2024 · accessed Oct 2026
- Labour Act Cap L1, Laws of the Federation of Nigeria 2004 (PLAC copy) · accessed Oct 2026
- TheCable: CBN foreign exchange manual 2026, key changes (3 Jun 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.