Here is a small heartbreak that plays out in Lagos, Abuja and Port Harcourt every single month. You negotiated hard. You got ₦400,000. You told your family, you told yourself, you maybe even told your landlord. Then payday came, your phone buzzed with a credit alert, and the number was ₦322,000-something. You stared at it like it had insulted your village.
Nobody robbed you. That gap between the offer and the alert is the most normal thing in Nigerian employment, and the only reason it feels like a betrayal is that nobody taught you to do the maths. So today we fix that. By the end of this, you'll be able to take any gross offer and estimate your real take-home pay before you sign — not after the alert disappoints you.
One caveat up front, Buddy: this is general guidance, not financial or tax advice, and Nigeria's tax rules changed substantially in 2026, with more tweaks likely. Treat the numbers here as a working model, and confirm your exact figures with your HR or a tax professional.
Gross, taxable, and net — three different numbers
Most people think there are two numbers: the salary and "what they take." There are actually three, and confusing them is where the pain starts.
Gross is the full headline figure — the ₦400,000.
Taxable income is what's left after the law lets you subtract certain things (your pension contribution, rent relief, and similar deductions). Tax is calculated on this, not on gross.
Net — your take-home — is gross minus pension minus tax minus any other deduction like the National Housing Fund. This is the number that actually shows up in your account.
Learn those three words and you already understand more about your salary than half of your colleagues.
The deductions, one by one
Let's meet the things standing between your gross and your alert.
Pension (8%). Under the Pension Reform Act 2014, you contribute 8% of your basic, housing and transport allowances, and your employer adds 10% on top — that 10% is theirs to pay, not deducted from you. Your 8% is also tax-exempt, which means it lowers your taxable income. So pension takes money from your take-home, but it softens your tax at the same time, and the money isn't gone — it's yours, sitting with your PFA.
PAYE tax. This is Pay As You Earn, the income tax your employer deducts and remits on your behalf. Since 1 January 2026, Nigeria runs a new set of progressive bands under the Nigeria Tax Act 2025. We'll do a full worked example below.
National Housing Fund (2.5%). This is 2.5% of your basic salary. Public employers enforce it strictly; many private employers only deduct it if you opt in. Check your payslip — if you see "NHF," that's it.
The employer's side. Your employer also pays a 10% pension match and a small National Social Insurance Trust Fund contribution. These don't come out of your salary, but they're part of what it actually costs the company to employ you — useful to know when you understand why a firm fights over ₦20,000.
The 2026 tax bands you actually need
Here's the headline good news of the new law: the first ₦800,000 of your annual income is taxed at 0%. That's roughly ₦66,000 a month earned completely tax-free before any band kicks in. Workers on or near the ₦70,000 national minimum wage now effectively fall out of the PAYE net entirely.
After that tax-free slice, the bands stack like this, on an annual basis:
First ₦800,000: 0%
Next ₦2,200,000: 15%
Next ₦9,000,000: 18%
Next ₦13,000,000: 21%
Next ₦25,000,000: 23%
Above ₦50,000,000: 25%
There's also a new rent relief: you can deduct 20% of your annual rent from your taxable income, capped at ₦500,000. So if you pay ₦1,200,000 rent a year, you knock ₦240,000 off your taxable income. Keep your tenancy agreement — it now has tax value.
A full worked example: the ₦400,000 Buddy
Let's take a Lagos professional on ₦400,000 a month — ₦4,800,000 a year — and find the real take-home. To keep it clean, assume the full salary is pensionable and the person pays ₦1,200,000 rent a year. (Your own split of basic versus allowances will shift these numbers slightly, which is exactly why you should run your own.)
