How to hire employees in Nigeria

Hiring an employee in Nigeria usually means one of two things: you set up a Nigerian entity and put the person on your own payroll, or you engage an employer of record (EOR) that becomes the legal employer while the person works for you. The first gives you control and is worth it once you plan to build a team there; the second gets one or two people working quickly without standing up a company. Capstan does not offer EOR services, so if that is the route you need, engage a provider directly.

The detail sits in a handful of statutory categories and some real-world FX practicalities. This guide is a conceptual map, not a rate card. The exact rates, thresholds, and rules change, so confirm current figures with local counsel or a Nigerian payroll provider before you rely on them. This is not legal advice.

Entity or employer of record

If you form a Nigerian entity, you become the employer yourself. You register with the relevant tax and pension authorities, run payroll through those registrations, and carry the employment obligations directly. That is the right foundation once you intend to hire several people or stay for the long run.

If you are not ready for that, an EOR employs the person under its own Nigerian entity, handles their payroll and statutory obligations, and invoices you. You direct the work; they carry the employment. It costs more per head and gives you less control, and it is the sensible bridge for a first hire or a short experiment. Either way the person is an employee, with the obligations that follow, not a contractor you can treat casually.

PAYE and statutory contributions exist

Every Nigerian payroll run withholds tax and contributions and remits them to the right authorities. You do not need to master the maths, but you should recognise the categories, because they drive what your payroll provider needs from you.

PAYE income tax withholding. Income tax on salary is withheld each pay period under the Pay As You Earn system and remitted to the tax authority of the relevant state. Where the employee is resident matters, because personal income tax in Nigeria is administered at state level, which is why the applicable authority is not always the obvious one.

Pension contributions. Nigeria operates a contributory pension scheme, with both employer and employee contributing a portion of salary into the employee’s retirement account. It typically applies once an employer crosses a size threshold, after which it covers eligible employees.

Other statutory contributions. Depending on your size and sector, further statutory contributions may apply, covering areas such as employee compensation, industrial training, and housing. Which of these apply to you depends on headcount and payroll size, so treat them as a list to check rather than a fixed set.

The pattern is the familiar one: named categories, some triggered by size or sector, and numbers that move year to year. That is why the calculation belongs with a provider who keeps up with it, and why this guide gives you none of the numbers.

The contractor line

A common and expensive mistake is treating someone as an independent contractor who, by the way they actually work, is an employee. The distinction turns on the substance of the relationship: a contractor runs their own business, controls how the work is delivered, invoices you, and handles their own tax; an employee works under your direction, integrated into your team, with the statutory obligations that employment carries. Getting this wrong can bring back taxes, unpaid contributions, and penalties. If you are unsure which you have, read contractor versus employee and get advice before you commit, because the label you choose is not the one that decides.

Data protection

Nigeria has the Nigeria Data Protection Act, which governs how personal data, including employee data, is collected, stored, and used, and it is overseen by a dedicated regulator. What you must disclose, retain, and secure sits under that framework, so treat employee data with the care a national regime expects, keep it in one controlled place, and confirm your obligations. Our note on HR data security and compliance covers the practices that travel across regimes.

Currency and paying people

Employees in Nigeria are generally paid in naira, and moving money into the country and paying people locally comes with foreign-exchange practicalities that catch out founders paying from abroad. Exchange rates, the mechanics of funding a local account, and the timing of transfers all affect payday. Work these through with a local payroll provider or bank early, because they shape your banking setup rather than being a detail you can sort out at the end.

Where Capstan fits

Capstan does not run Nigerian payroll and is not an employer of record. It holds no tax tables, computes no gross-to-net, and files no returns. What it does is be the system of inputs around the calculation: employee records, pay structures, joiners and leavers, leave, attendance, and one-off adjustments, all compiled into a documented export for your Nigerian payroll provider. Their computed results come back onto the employee record, so your system of record and their filings stay in agreement. Contractors live in the same workspace as your team, and the contractor module adds their portal, invoices and payout register on top; like every module it needs a paid plan under it. The core is free up to twenty active employees, and every price sits on the pricing page.

Public holidays. There is no bundled Nigerian holiday set, so you create the calendar, set its working week, add the dates, and assign it to the locations it covers. Bundled sets exist today for a short list of countries and Nigeria is not on it, which is worth knowing before you plan a first-day setup rather than after. The calendar itself works the same way everywhere: holidays typed as public or restricted, a cap on how many restricted days an employee may pick, and an employment inheriting its calendar through its location.

Jurisdiction rules are data, not code. Nothing in Capstan hardcodes a country. Jurisdiction content ships as versioned country packs a workspace adopts, which is what lets a rate change be a new version of the content rather than a software release. Being exact about what exists today: the only pack authored is for India, and it covers contractor invoice withholding and tax lines rather than employee payroll. For Nigeria, the tax treatment comes from you and your provider.

The payroll export is the same shape everywhere. It carries day counts, the compensation components in force at period end, and joiner or exit prorations recorded as dates and payable days rather than prorated amounts. There is no Nigeria branch in it, because there is no country logic in it at all. Your provider supplies the country; Capstan supplies clean, documented inputs and files the computed results back onto the record.

Where to go next

If your Nigerian hire is part of a wider cross-border team, the guide to hiring global contractors covers the structures involved, and the country notes for the UAE and Indonesia follow the same shape. For the current PAYE, pension, and contribution rules this guide has deliberately left out, speak to a Nigerian payroll provider or employment counsel. The numbers move; the structure they sit inside is the part worth carrying.