National Housing Fund deductions for Nigerian staff
What the National Housing Fund contribution is, how a Nigerian employer switches it on in Achekam and sets its pay basis, and how to pay FMBN.
By Achekam · · 4 min read · For Running a business businesses in Nigeria
Ask a few small Nigerian employers about the National Housing Fund and you will hear several different answers. Some deduct it from every payslip. Some have never heard of it. Some deducted it for years and stopped when the person who set up the payroll left. And a few deduct it every month but never quite get round to paying it over.
That last group is the one in real trouble, because NHF money deducted from pay belongs to the employee and the Fund, not the business. This article explains what the contribution is at the time of writing, how Achekam asks you to make a deliberate choice about it, the one setting that changes every figure, and how to pay and record what you deducted.
The contribution: from the employee, with no employer match
The National Housing Fund contribution in Nigeria is 2.5% of pay from the employee. There is no employer match: unlike pension, the employer does not add a contribution of its own. The money is paid to the Federal Mortgage Bank of Nigeria (FMBN) within one month.
Because the employer adds nothing, NHF does not change what an employee costs the business. It changes what the employee takes home, and it makes the business responsible for passing the deduction on promptly.
FMBN sets out the law behind the Fund (Act 3 of 1992) on its page on the NHF scheme's legal framework, which describes the contribution as a mandatory 2.5% monthly contribution and covers contributor benefits, registration and the conditions for a refund. Read it, and if you are unsure whether and how it applies to your staff, take the question to your adviser before you set up the payroll.
NHF is opt-in per employer in Achekam
Achekam's Nigerian payroll calculates PAYE, pension, NSITF, the ITF levy and the National Housing Fund from a table a person confirms. NHF is opt-in per employer: the payroll does not deduct it until the employer switches it on.
That design forces a decision rather than a default. An employer that has decided, with advice, to deduct NHF switches it on. One that has not is not left deducting money it has not considered. Either way, write the decision and the reasoning into the payroll file, so the next person to run payroll does not undo it by accident.
Stating which pay it is calculated on
When NHF is switched on, the employer states which pay it is calculated on. That choice drives every NHF figure on every payslip, so it deserves care. Two employees on the same total package can have very different NHF deductions depending on which part of their pay the 2.5% applies to.
Agree the basis with your adviser, record it, and apply it the same way for every employee. If you ever change it, change it from a month start, note the date, and tell staff before their payslips change. Staff notice NHF more than most deductions, because it is the one line on the payslip with no employer contribution beside it. A short note to each employee explaining what the line is, where the money goes and how they can see their contributions with FMBN saves a round of questions after the first payday.
The monthly NHF schedule
From approved pay runs, Achekam prepares Nigeria's monthly statutory schedules: PAYE per State, pension per pension fund administrator, NHF and NSITF, as well as the annual employer and ITF returns. The NHF schedule lists each employee's contribution for the month, and it is what you use to pay FMBN.
In the wages journal
When a pay run is approved, Achekam posts it to your own ledger as a wages journal, with the amounts owed to the tax authority and the funds shown as liabilities. The NHF deducted sits in its own liability until it is paid. That liability is a useful early warning: if it grows month after month, NHF is being deducted and not paid.
Recording what you paid
Achekam does not file or pay Nigerian payroll returns. A person pays FMBN through the Fund's own channel and records the filing with the reference it gave. A second person confirms each payment.
A worked example, in words
An employer with five staff switches NHF on and states that it is calculated on basic salary, as agreed with its adviser. In January:
- The payroll officer prepares the January run; the owner approves it.
- Each payslip shows 2.5% of basic salary deducted for NHF, and nothing added by the employer.
- The wages journal shows the total NHF deducted as a liability.
- The NHF schedule lists the five contributions.
- Before the month is out, the payroll officer pays FMBN the schedule's total and records the payment with FMBN's reference.
- The owner checks the reference and amount against the schedule and confirms it.
- The NHF liability for January is cleared.
A short NHF checklist
- Decide, with advice, whether to deduct NHF, and record why.
- Switch it on per employer in Achekam only once decided.
- State the pay it is calculated on, and keep it consistent.
- Pay FMBN within one month of deducting.
- Record each payment and have a second person confirm it.
- Watch the NHF liability for anything left unpaid.
Pension is the other contribution that needs a decision before the first run; see the Nigerian pension coverage decision. The employer-only costs, NSITF and the ITF, are covered in NSITF and ITF: what Nigerian employers pay. For the payroll steps that still need a person in both countries, see Nigerian and Kenyan payroll gaps.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
