NHF deductions for a Nigerian client
Whether a Nigerian client's payroll should deduct National Housing Fund contributions, and how a bureau records each employer's NHF choice and pay basis.
By Achekam · · 5 min read · For Accountants & audit firms in Nigeria
Ask five Nigerian employers whether they deduct National Housing Fund contributions and you may get five different answers. One deducts from everyone, one only from staff who asked, one has never heard of it, one stopped when the previous payroll provider left, and one deducts but has not paid anything over in months.
A bureau inherits whichever of these positions the client happens to hold. The risk is not the arithmetic, which is simple. It is running a deduction nobody decided on, or failing to run one the client should, and then having no record of why. This article covers what the law says, how Achekam treats NHF as a choice made per employer, and the records a bureau should keep.
What the law says about NHF
At the time of writing, the National Housing Fund contribution in Nigeria is 2.5% from the employee, with no employer match, and it is paid to the Federal Mortgage Bank of Nigeria (FMBN) within one month.
Three features of that rule shape the bureau's work:
- It comes out of the employee's pay. The employer adds nothing of its own, so NHF changes net pay but not the employer's cost.
- It is paid to FMBN, not to the State revenue service that receives PAYE and not to the pension fund administrator.
- It has a one-month payment window, so a deduction made on the payslip is money held for someone else until it is remitted.
FMBN, which runs the scheme, sets out its own reading of the law on its page on the legal framework of the National Housing Fund scheme: the Act behind the fund (Act 3 of 1992), the contribution, contributor benefits, how to register and the conditions for a refund. Send it to any client that is unsure whether the fund applies to it, and keep a copy of the client's conclusion.
Opt-in for each employer
For a Nigerian employer, Achekam's payroll computes PAYE by the employee's State of residence, pension, NHF, NSITF and the ITF levy, and prepares schedules for a person to file and pay. NHF is opt-in per employer: it is not deducted until the employer is set up to deduct it.
That design puts the decision where it belongs, with the employer and its advisers rather than with a software default. It also means a bureau cannot assume. For every Nigerian client, the onboarding file should hold a short, signed answer to one question: does this employer deduct NHF, and from whom?
Treat a "no" with the same care as a "yes". If a client decides not to deduct, record who decided, when, and on what basis, so that the question does not have to be reopened every time a new payroll officer joins the client.
Basic or total pay: the employer states which
The second decision is the base. When NHF is switched on, the employer states which pay the contribution is calculated on, and Achekam calculates on that basis.
A bureau should not choose this on the client's behalf. Put both options to the client, ask it to confirm one in writing, and apply it consistently. A worked example in words shows why consistency matters: an employee whose package is mostly basic salary sees little difference between the two bases, but one with large housing and transport allowances sees a much bigger deduction on total pay. Switching base halfway through the year produces payslips that employees will notice and question, and a contribution history that is hard to explain to FMBN.
If the client does change its basis, record the effective month and the reason, and tell employees before the payslip changes.
Before the first run
Two other set-up steps come before any NHF figure appears:
- Confirm the table. Achekam ships its payroll tables pre-loaded but unconfirmed, and no run uses a table until a named person at the firm confirms the firm's own copy. For Nigeria, confirming requires choosing the pension coverage threshold and giving a reason, covered in deciding whether pension applies.
- Check every State of residence. PAYE goes to the State where each employee lives, and the schedules are split by State revenue service; see Nigerian PAYE by State and the annual return.
Paying FMBN
From approved runs, Achekam prepares the monthly Nigerian schedules: PAYE per State, pension per pension fund administrator, NHF and NSITF, as well as the annual employer and ITF returns. The schedules download as Achekam's own CSV layout and a PDF, not in each authority's upload template, so the NHF figures are transferred into FMBN's own channel by a person.
Achekam does not file or pay Nigerian payroll returns. The working routine looks like this:
| Step | Who |
|---|---|
| Approve the month's run | Payroll approver, not the preparer |
| Finalise the NHF schedule | Someone other than its preparer |
| Remit to FMBN within the month | The client, or the bureau where it holds the mandate |
| Record the remittance with FMBN's reference | The person who paid |
| Confirm the payment | A second person |
The point of the last two rows is evidence. If an employee later asks FMBN for a contribution statement and a month is missing, the bureau can show what was paid, when and under which reference.
Records for employees
Employees care about NHF because it is their money. Keep, for each Nigerian client:
- the signed NHF decision and the pay basis, with any change and its effective month;
- each month's NHF schedule as produced, and the remittance reference;
- a list of employees who joined or left during the month, since their first and last contributions are the ones most often missed.
When a client stops deducting, make sure the last month's deductions were paid over. Deductions held and never remitted are the worst position of all: the employee has lost the money and the fund has not received it.
Make NHF a fixed item on the onboarding checklist for every Nigerian client, next to pension coverage, so that the answer is recorded once and reviewed each year.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
