NIGERIA

Compliant HR, Payroll, Immigration & Tax

OVERVIEW

Nigeria is a country located in West Africa along the Gulf of Guinea on the Atlantic Ocean. It is a federal constitutional republic comprised of 36 states. English is the official language of Nigeria, and its currency is the Nigerian naira (NGN).

Nigeria became the largest economy in Africa after its rebasing in 2014. The GDP is estimated at 397 billion United States dollars (USD) for 2018 based on the information available from the Nigerian Bureau of Statistics.

GENERAL INFORMATION

country capital

CAPITAL CITY

Abuja

language

OFFICIAL LANGUAGE

English

currency

CURRENCY

Naira (₦) (NGN)

dial code

DIALLING CODE

+234

tax calculator

TAX AUTHORITY

Federal Inland Revenue Services (FIRS)
http://www.firs.gov.ng/Pages/default.aspx

tax dates

TAX YEAR

1 January – 31 December

time zones

TIME ZONE

West Africa Time WAT (01:00)

GENERAL INFORMATION

country capital

CAPITAL CITY
Abuja

language

OFFICIAL LANGUAGE
English

currency

CURRENCY
Naira (₦) (NGN)

dial code

DIALLING CODE
+234

tax calculator

TAX AUTHORITY
Federal Inland Revenue Services (FIRS)
http://www.firs.gov.ng/Pages/default.aspx

tax dates

TAX YEAR
1 January – 31 December

time zones

TIME ZONE

West Africa Time WAT (01:00)

MORE INFORMATION

Nigeria is still classified as a developing country and as such is a member of the Organisation of Petroleum Exporting Countries (OPEC) since 1971. Nigeria ranks as the largest oil producer in Africa and the 11th largest in the world. In addition to oil and gas, Nigeria has enormous underexploited mineral resources, including coal, bauxite, gold, and iron ore. The country’s natural properties have attracted the attention of the super major oil and gas companies as well as businesses in allied industries, including oil field equipment and services, transportation and logistics, petrochemicals and plastics.

Nigeria is seventh most populous country in the world, it is also rapidly expanding its infrastructure and witnessing foreign and domestic investment from major players in the engineering and construction industry as well as the telecommunications sector. The financial services segment also continues to expand in Nigeria as international banks and investors look to capitalise on the expansion of the West African market.

Official Holidays:

1 Jan – New Year’s Day

8 Mar – Women’s Day                  

22 Mar – Mothering Sunday                         

10 Apr – Good Friday                      

11 Apr – Holy Saturday                   

12 Apr – Easter Sunday                  

13 Apr – Easter Monday                

1 May – Workers’ Day                   

24 May – Id el Fitr                             

25 May – Id el Fitr additional holiday                         

27 May – Children’s Day                  

12 Jun – Democracy Day               

21 Jun – Father’s Day                     

31 Jul – Id el Kabir                          

1 Aug – Id el Kabir additional holiday                     

20 Aug – Al-Hijra  Local    

1 Oct – National Day                    

29 Oct – Id el Maulud                     

22 Dec – Sambisa Memorial Day                

25 Dec – Christmas Day                  

26 Dec – Boxing Day         

Any person who wishes to employ or engage a non-citizen in any occupation shall apply for a work and residence permit from the Nigeria Immigration Service prior to the entry by that non-citizen, the work and residence permits in Nigeria are called Combined Expatriate Residence Permit and Aliens Card (CERPAC) or Green Card

Normally, work and residence permit process are estimated to be one month for the first request. Non-citizens are encouraged to start the process by applying for a Subject to Regularization (STR) from the Nigerian High Commission in their home country before they enter Nigeria and upon arrival apply for a Combined Expatriate Residence Permit and Aliens Card (CERPAC)

There are 2 Categories of Work Permits that are applicable:

  1. Temporal Work Permit
  2. Subject to Regularization (STR) Visa and Combined Expatriate Residence Permit and Aliens Card (CERPAC)

Documents that are required for Work and Residence Permit applications are for the Subject to Regularization (STR) Visa and Combined Expatriate Residence Permit and Aliens Card (CERPAC)

For Applicant:

  • Formal application for STR Visa from the Employer / Institution accepting Immigration Responsibility
  • Valid Passport with a minimum of 6 months validity and at least 2 blank pages for visa endorsement
  • 2 passport sized photographs (35/40mm) taken within the last 6 months on white background
  • Duly completed Visa Form IMM22
  • Expatriate Quota Approval from the Employer / Institution accepting Immigration Responsibility 1
  • Evidence of financial support
  • Letters of Offer of Appointment and Acceptance of Offer
  • Educational qualifications and Curriculum Vitae
  • Extract of Board Resolution2

Note:

  • Persons exempted from Quota: Expatriates of companies operating in the Free Zones, Foreign Students, Expatriate Technical Officials of Missions, Expatriates of International Non-Governmental Organizations (INGO) and Government Officials.
  • Applicable to CEOs, MDs and GMs of Companies

Important: Application for STR Visa should be made at Country of Residence

For Dependents:

  • Evidence of Regularization of Principal
  • Marriage Certificate of Spouse
  • Birth certificate for children confirming nexus

Validity of STR Visa is 90 Days from the date of issue.

How to Apply:

Step 1:

Apply online and complete the online visa application form IMM22 and print two (2) copies of the completed form.

Step 2:

Make online payment here and print your payment receipt.

Step 3:

  • Attach 2 passport sized photographs to completed Visa Form IMM22, along with the other requirements and submit through any of the following:
  • Via Post to the Embassy/High Commission/Consulate of Nigeria where applicant is A Resident
  • In person at designated Visa Application Centre (where applicable) or,
  • In person at the Embassy/High Commission/Consulate of Nigeria where applicant is Resident.

Timeline for processing the STR visa maximum of seven (7) to 14 (14) days from receipt of application.

Payroll for locals is calculated and paid in Naira or US Dollars. Payroll for expatriate personnel is typically administered in United States Dollars (USD).

For all income derived from carrying out an assignment in Nigeria, income tax is payable to the Federal Inland Revenue Services (FIRS) at the prescribed rates for either resident or Non-resident Employees. Taxes are deducted from the Employee’s salary/wages at source and paid over to the Federal Inland Revenue Services (FIRS) on a Monthly basis in line with the Nigerian tax regulations.

At the end of each tax year or at the termination of the Employment (Whichever is the earliest) a statement of earnings for the current tax year must be provided to the employee to include with their tax return in their home country.

Personal Income Tax

The table below shows a summary of the taxable income tax bands and applicable rates of tax on an annual basis. Where a taxpayer has no taxable income because of personal reliefs and allowances or total income produces a tax lower than the minimum tax, a minimum tax rate of 1% of the total income is payable.

Payroll contribution

Under the Employee Compensation Act, all employers were required to contribute 1% of their payroll cost in the first two years of commencement of the Act (2010 to 2012). Then, assessments were expected to be issued by the Nigeria Social Insurance Trust Fund, the body empowered to administer and implement the Act. In practice, a contribution of 1% of payroll continues to apply.

Pension contributions (Optional for Expats)

Employers with at least 15 employees are required to participate in a contributory pension scheme for their employees. The minimum contribution is 18% of monthly emolument (with a minimum contribution of 10% by the employer and 8% by the employee). If the employer decides to bear all the contribution, the minimum contribution is 20% of monthly emolument. Mandatory and/or voluntary contributions by the employers are deductible for CIT purposes.

National Housing Fund (NHF) contributions (Optional for Expats)

NHF contributions are applicable to Nigerian employees earning a minimum of NGN 3,000 per annum. The employer is required to deduct 2.5% of basic salary from employees earning more than NGN 3,000 per annum and remit it to the Federal Mortgage Bank of Nigeria within one month of deduction.

Contracts:

An employer is required to provide an employee with a written employment contract within three months of the employee commencing his or her job. The contract must contain:

  • the employer’s name or group of employers;
  • the worker’s name, address, position and date of engagement;
  • the nature of the employment;
  • the date of expiry, if a fixed-term contract;
  • the notice period for termination;
  • wages, frequency of payment and method of calculation;
  • hours of work, holiday pay and conditions for incapacity owing to sickness and injury; and
  • special conditions of the contract

An employer which desires to employ foreign nationals must attain a detailed authorisation that approves the maximum number of expats the employer can engage, their job titles and the length of such employment. Companies must show that there are no appropriately qualified Nigerian workers for the positions to be employed by expatriates and, where endorsement is granted, Nigerians are expected to be qualified to fill the positions over time. These necessities do not apply to the employment of Nigerian nationals and nationals of member states of the Economic Community of West African States (ECOWAS).

Any company that proposes to employ an overseas national must obtain an expat quota approval from the Federal Ministry of the Interior. This approval permits a company to hire non-Nigerians for defined approved job designations for a detailed duration of time, usually two years in the first case. In relation to nationals of ECOWAS member states who are entitled to reside and work in Nigeria, an employer can require the employee to show or provide thier ECOWAS card or international ECOWAS passport. The employer will require either document to apply for an ECOWAS residence card, which enables the employees to live and work in Nigeria.

A probationary period may last (sec. 2, Decree No. 96-195 of 7 Mar. 1996):

  • eight days for daily or hourly paid workers;

Paid Leave:

Under the Labour Act an employee is entitled to at least six days of annual leave for every 12 months of employment. Every worker shall be entitled after twelve months continuous service to a holiday with full pay of

  • at least six working days; or
  • in the case of persons under the age of sixteen years (including apprentices), at least twelve working days.

Severance Pay:

The Labour Act does not propose exact rules in terms of severance pay. However, it advises that the total amount of deductions from an employee’s salary in a single month cannot exceed one-third of the employee’s salary for the month. In practice, employers usually deduct any outstanding sums owed by the employee from the employee’s final salary.

Employer of Record

Although an Employer of Record often works with a staffing agency, the two are separate business entities. Each has specific roles and responsibilities in their symbiotic relationship.

Purpose

An employer of record serves as an employer for tax purposes while an employee performs work for the client, such as a staffing firm or other business. An employer of record handles all personnel functions, including payroll processing and funding; tax deposits and filing; and employment contracts and paperwork. Maintaining a Certificate of Insurance, and Verification forms; unemployment insurance; and workers’ compensation are done. An employer of record also performs background checks and drug screenings; administers benefits; terminates employees; and may handle worker issues. Conversely, a staffing firm recruits’ employees and assigns them to businesses for worker absences, temporary skill shortages, seasonal work, or special projects. Their main focus is to match temporary, temp-to-hire, long-term, or permanent workers with clients in need.

Benefits

Using an employer of record allows the client company to free up time and cost-effectively outsource its necessary human resource functions, employee benefits, payroll, workers’ compensation, and compliance issues. The money saved by outsourcing these functions can be used to expand the business, provide steady income for the owner, or fill a variety of other purposes. Onboarding quality talent is done quickly by an employer of record so clients can quickly ramp up staff and staffing agencies can deliver top quality workers to their clients. Most staffing agency owners don’t have the HR training, payroll and accounting skills, compliance knowledge, or risk management, insurance, and employee benefits background to meet the demands of being an employer.

Responsibilities and Liabilities

The client company or staffing agency owner retains control over business operations and responsibility for workplace safety and compliance. The employer of record assumes responsibilities and liabilities for employment issues such as administration, payroll, taxes, benefits, and maintaining employee records. Because the employer of record assumes most of the responsibility for compliance and tax laws, the client or staffing services owner receives peace of mind, knowing their business is being taken care of by qualified professionals.

Whereas an employer of record and staffing agency often work together, they have diverse purposes in the workplace.