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The short answer
Fix salaries in naira, then convert enough dollars a few days before payday to cover net pay plus PAYE, pension and levies, which fall due soon after (PAYE by the 10th of the next month, pension within 7 working days of paying salary). Compare the full cost of each conversion, the transfer fee plus the margin against the mid-market rate, and keep a small naira buffer so a late transfer or a rate move does not delay salaries.
For a US company with a team in Nigeria, revenue comes in dollars and payroll goes out in naira. Every month you make two decisions: how much to convert and when. Get them wrong and you either pay salaries late or leave money on the table. This guide sets out a routine that works for small teams.
Decide what currency the salary is in
Most Nigerian employment contracts state pay in naira. That puts the exchange-rate risk on you: if the naira weakens, the dollar cost of payroll falls; if it strengthens, it rises. Some employers peg salaries to a dollar figure converted monthly, which moves the risk to staff and makes take-home pay change each month. Whether you can pay in dollars at all is a separate legal question; see paying Nigerian staff in USD. Whichever you choose, state it in the contract.
Know the full naira amount you need
Net salaries are only part of it. A month's naira requirement usually includes:
- net salaries paid to staff;
- PAYE, remitted to the state IRS on or before the 10th of the following month (PwC);
- employee and employer pension, remitted to PFAs within 7 working days of paying salary (PenCom);
- NSITF, ITF and any NHF your staff contribute to;
- allowances, reimbursements and the cost of the transfers themselves.
The Labour Act requires wages to be paid at the end of each agreed period, at least monthly, so the date in the contract is the date that matters.
When to convert
- Five to seven working days before payday: convert for net salaries. This allows for a transfer delayed by compliance checks, a public holiday in either country, or a weekend.
- With the salaries, or soon after: convert for pension, which is due within 7 working days.
- Before the 10th: convert for PAYE, if you did not fund it with the salaries.
Converting everything in one transfer is usually cheaper if the provider charges a fixed fee per transfer, and simpler to reconcile. Splitting the conversion across the month spreads the rate risk but adds fees.
Worked example
Example only, with an illustrative rate. Your total naira need for the month is ₦9,000,000. At ₦1,500 to $1 that costs $6,000. If the naira strengthens to ₦1,450 before you convert, the same payroll costs about $6,206.90 (₦9,000,000 ÷ 1,450), about $207 more. If it weakens to ₦1,550, it costs about $5,806.45. Never budget payroll on today's rate alone; budget on a range and hold the difference in reserve.
Comparing what a conversion costs
Each provider makes money in one or both of two ways: a transfer fee and a margin between the rate it gives you and the mid-market rate. To compare, look at the naira amount delivered for the same dollar amount, on the same day, including all fees. Banks' international wires, money transfer apps and business accounts with naira details all price differently, and their quotes change through the day. Check each provider's own pricing page and quote at the time you convert.
Set a written policy
A one-page policy saves arguments later. It should say who decides when to convert, the latest day each month a conversion may happen, the buffer you aim to hold, the providers you use and who approves a transfer above a set amount. If an employer of record runs your payroll, the policy also says when you fund the EOR's invoice and in which currency, because some EORs bill in dollars and convert for you at their own rate. Review the policy each quarter against what the conversions actually cost.
Keep a naira buffer
A buffer of part of a month's payroll held in naira means a delayed transfer does not delay salaries. It also lets you convert when the quote suits you rather than on a fixed date. The trade-off is that the buffer itself is exposed to the naira rate; see FX gains and losses on naira balances for how that shows up in your books.
Record the rate you actually used
For your US books and tax return, the IRS says amounts must be reported in US dollars, converted at the exchange rate prevailing when the item was paid or received, and that it has no official rate. Keep each conversion confirmation showing the rate, the fee and the naira received. For planning beyond payroll, see cash-flow planning with USD revenue and naira costs.
Where Pryme fits
A Pryme Business Account holds USD and NGN with local details for each, so dollar revenue can sit in USD until you need it. Swap converts when you choose, showing the rate first and the fee on its own line before you approve, and payroll pays all naira salaries in one batch. Outside Nigeria, Pryme works through regulated partners.
Questions people ask
When should I convert dollars for Nigerian payroll?
Several working days before payday for net salaries, allowing for delays, and before the pension and PAYE deadlines for those amounts.
Is it cheaper to convert all at once?
Often, if fees are charged per transfer, but compare the naira delivered including all fees on the day.
Who carries the exchange-rate risk on naira salaries?
If the contract states pay in naira, the employer does. A salary pegged to dollars moves the risk to the employee.
What rate do I use in my US books?
The IRS says to use the rate prevailing when the payment was made; there is no official IRS rate. Keep each conversion confirmation.
Sources
- PwC Worldwide Tax Summaries: Nigeria, individual tax administration (reviewed 29 May 2026) · accessed Oct 2026
- PenCom: Frequently Asked Questions, 2023 edition · accessed Oct 2026
- Labour Act, Cap L1 LFN 2004 (text) · accessed Oct 2026
- IRS: Foreign currency and currency exchange rates (reviewed 22 May 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.