Expanding operations in one of Africa’s major business hubs like Nigeria would be wise. Why? Let’s take a look. 

Nigeria is the sixth-most populated country and the most populous black nation in the world. The country’s population is close to 235.8 million and boasts a GDP close to USD 364 billion, which is growing at 2.9% annually. Its GDP per capita stands at USD 2,500 (as of 2024), and it’s been constantly increasing since 2020. 

Nigeria is Africa’s largest oil and gas producer, producing over Three trillion cubic ft. per year. The country holds the largest natural gas reserves on the continent and ranks 9th globally. Moreover, Nollywood, the Nigerian film industry, is the world’s second-largest film producer. 

The fast growing Nigerian population consists of a young and energetic pool of talent. According to some estimates, Nigeria will become the third most populous country in a few decades. Nigeria’s labor population is over 110 million (as of 2023 data), ranking 7th in terms of labor force. The country features a high labor force participation rate of 83%, better than Uganda (81%) and slightly lower than Tanzania (84%). 

Economic FactorPercentage or Rank
Oil and Gas ProductionLargest sector
Natural Gas Reserves1st in Africa, 9th globally
Nollywood Film Industry2nd largest film producer globally
Labor Force7th largest labor force
7th largest labor force2.9% annual growth
Minimum Wage1st in Africa, 9th globally

Considering steady economic growth, favorable labor participation rate, feasible monthly salaries, and the fact that some regions may have better cost savings than others, doing business in Nigeria seems viable. Does that mean you should start on your own without any professional assistance? This could be a challenge.

Nigeria is home to more than 250 ethnic groups speaking over 500 languages. Managing people from different communities and ethnicities is a challenge, but compensating them according to local regulations is even more crucial. 

You can avoid these hassles by joining hands with a professional employer organization (PEO) in Nigeria. Here, we’ll explain how PEOs in Nigeria can make your business operations run safely and smoothly.

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Professional Assistance for Small Businesses

Did you know that small and medium enterprises (SMEs) make up about 95% of the global organizations, generating up to 70% of the global job opportunities. By 2030, SMEs will likely generate more than 600 million jobs around the globe. 

The challenging part is that these entities must manage employees and comply with the local rules and regulations. This is where a PEO comes in. Essentially, PEOs manage HR and payroll for small- to medium-sized businesses, helping them expand their reach.  

National Association of Professional Employer Organizations (NAPEO) states that businesses working with PEOs are 50% less likely to fail than those operating on their own. Professional assistance helps these businesses grow 7-9% faster and reduce turnover by 10-14%.

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How PEOs Facilitate Businesses

A Professional Employer Organization (PEO) is a private organization that assists SMEs with HR, payroll management, and other administrative support. In addition to providing the basics, a PEO also serves as a co-employer, especially when employers come from a different part of the world.

For businesses setting foot in Nigeria, PEOs offer a range of services, including:

  • Payroll processing
  • Legal compliance
  • Compensation, etc.
  • Employee screening, training, onboarding, offboarding
  • Employee benefits disbursement
  • General HR services

The most apparent outcomes of working with a reliable PEO in Nigeria include:

  • Reduction in operational costs
  • Compliance with labor and taxation laws
  • Prevention of internal politics and other in-house evils.

Why Hire a PEO in Nigeria

A study evaluating the possible causes of SME business failures reviewed 95 articles published between 1968 and 2016. It identified the “lack of availability and optimal combinations of resources and opportunities” as one of the major causes. 

For a foreign business expanding operations in Nigeria, it would be better to collaborate with a professional who understands the terrain, is familiar with the local employment laws, and completes the paperwork on their behalf. 

An experienced PEO in Nigeria offers several benefits during the operational phase. These include:

An experienced PEO in Nigeria offers several benefits during the operational phase. These include:

  • Tailored HR processes
  • Faster payroll processing 
  • Adherence to payroll laws
  • Automated HR operations
  • Better benefits to workers
  • Accurate tax and benefits calculations

What You Need to Know Before Hiring in Nigeria

Nigeria has a competitive labor industry that serves businesses worldwide. It poses many hurdles for employers looking for the right talent on their own.

  • Hiring a tech-savvy workforce: The local workforce is tech-savvy and competitively priced. But while hunting talent in Nigeria, you also have to compete with thousands of other employers. 
  • Training laborers in the manufacturing sector: On the other hand, the manufacturing sector is dominated by young laborers who require formal training. Here, the major obstacle is to train them in their native language.  
  • Managing employees from different communities: As mentioned earlier, Nigeria offers cultural diversity and language barriers, making it difficult for foreign employers to manage resources under one roof.
  • Local regulations: Rules differ from place to place, adding extra burden on employers. There’s no excuse for being unfamiliar with Nigeria’s labor laws or tax regulations.

Only an experienced and reliable PEO in Nigeria can help sort out these pressing issues. They can start the hiring process on your behalf without waiting for a legal entity to be established in Nigeria. This efficiency allows you to start operations immediately.

Critical Things to Know Before You Hire in Nigeria

You need to be familiar with the following:

CategoryDetails
Nigerian Languages

The official language is English, but one must be fluent in regional languages like Hausa, Igbo, Ibibio, Yoruba, Kanuri, Fulfulde, and Tiv. 

Societal NormsNigerians are not shy; they value humility and appreciate politeness in interactions.
Income Tax RateThe personal income tax rate in Nigeria remains steady at 24%.
Labor Force Distribution

The labor force in Nigeria is associated with the services sector (around 47%), agriculture (38%), and industrial sector (around 15%). 

EconomyNigeria has a developing economy, showing significant improvement in Q2 of 2024 and continuing to grow.
Exchange RateCurrently, 1 USD is approximately 1500 NGN.
Employment LawsNigerian labor laws are strict, protecting workers’ rights and prohibiting discrimination.

Importance of Hiring a PEO in Nigeria

Nigeria’s labor force consists of over 48% female laborers (around 53 million) and 52% male laborers (around 57 million). Although it seems easy to find a resource, barriers, such as lack of education and experience, restrictions on female employment, and geographical limitations, can make the talent hunt more challenging. 

Moreover, Nigerian employment laws compel employers to fulfill their responsibilities. For example, the Child Rights Act 2003 sets the minimum age for employment at 15 years. 

Although there are conditions for hiring 14-year-old children, Nigerian law restricts employers from deploying children under 16 years old to underground work or on holidays. Also, some technical issues demand professional support, so you need a PEO in Nigeria with the right expertise.

Source of Employment Law

Employment laws in Nigeria are sourced from the country’s constitution (Constitution of the Federal Republic of Nigeria 1999), Laws of Federation of Nigeria (LFN) 2004, and other federal and state laws, including:

Understanding these rules and regulations requires legal knowledge and prior experience. Therefore, employers looking to expand their businesses in Nigeria should work with PEOs who understand these rules and can implement them to perfection.

Permission for Minors

Nigerian labor law shows leniency in hiring minors. At the same time, it enforces severe penalties and punishments on forced and exploitative child labor. For example, children should not be employed in industrial settings, but they can join technical schools or institutes for skill development. 

The Nigerian law conditionally allows minors to sign employment contracts. According to the Nigerian Labour Act 2004, Section 49, a minor between 12 and 16 years can sign a contract of apprenticeship with the approval from a labour officer and the consent of their parents or guardians. A person above 16 years of age can choose apprenticeship by himself.  

The Labour Act 2004 also sets restrictions:

  1. Purpose of apprenticeship must be to acquire systematic or domestic training 
  2. The period of apprenticeship should not exceed 5 years.
  3. According to section 53, an apprentice aged between 12 and 16 years cannot be removed from Nigeria without the Minister’s approval. Violation may result in a fine or one year imprisonment, or both.

Preventing Contract Violations

There are two types of employment contracts in Nigeria:

  • Long-Term (Indefinite) Contracts: These contracts have no predetermined expiration date. 
  • Definite (Temporary) Contracts: These contracts last up to one year. However, if the contract involves a period of technical training during work, its length can be extended to up to five years. 

Your PEO in Nigeria helps keep violations at bay by ensuring non-discrimination at the workplace. Moreover, they will prepare written agreements and hand them to the concerned employees before the job commences.

Payroll Compliance

In Nigeria, employers must meet or exceed the minimum wage criteria. Employers who cannot pay the minimum monthly wage of NGN 70,000 may face conviction or fine, or both. Employers may be fined with 5% of their monthly wages along with outstanding arrears of the workers’ wages.  

Moreover, employers must document and keep records of all wages, increases and adjustments for compliance audits. They must keep such records for the period of 3 years. Non-compliance may result in conviction and NGN 75,000 fine, along with an additional fine of NGN 10,000 for each day of non-compliance.

Payroll Contributions

Employer/Employee contributions in Nigeria are divided into the following basic categories:

A PEO in Nigeria can calculate these deductions to avoid tax violations later.

Calculating Individual Taxes

Nigeria follows a progressive tax system. This means that the tax rate will increase with the increase in taxable income. The table below shows different income brackets and progressive tax rates: 

IncomeRate
0 – 300,000 NGN7%
300,001 NGN – 500,00 NGN11%
500,001 NGN – 1,600,000 NGN19%
1,600,001 NGN – 3,200,000 NGN21%
3,200,001 NGN and above24%


For an employee earning up to NGN 5,000,000 per year, a PEO in Nigeria will calculate the accurate tax payable after deducting pension and other allowances from the salary.

Paying Companies Income Tax (CIT)

If your business is registered in Nigeria, you will be liable to pay tax on your profits. CIT applies to all businesses in Nigeria, including foreign companies with permanent establishment. The tax rate, however, varies with the turnover:

  • Profit is less than NGN 25,000,000 — 0%
  • Assessable profit is between NGN 25,000,000 – 100,000,000 — 20%
  • Assessable profit if NGN 100,000,000 or more — 30%

Leaves and Holidays

There are 11 public holidays in Nigeria, including New Year’s Day, Good Friday, Labour Day, Democracy Day (June 12), National Day (October 1), Christmas, and others. An employer cannot force their employees to work on any public holiday. 

Other than public holidays, employees who have completed 12 months with a company, are entitled to six annual leaves with full compensation. Workers under sixteen (including apprentices), who have completed 12 months with a company, are entitled to 12 annual leaves with full salary. 

  • Sick leaves: 12 paid sick leaves (medical certificate is mandatory)
  • Maternity leaves: 6 weeks before childbirth and 6 weeks after childbirth (the employee must complete at least six months with the company to qualify for maternity leaves)
  • Paternity leaves: 14 days (for public sector employees)
  • Bereavement leaves: 3 days of paid leave in case of the death of spouse, child, parent, or parent-in-law
  • Study leaves: Paid or unpaid (as per the contract)

Overtime

Your PEO in Nigeria is responsible for providing accurate overtime calculations according to the laws. In Nigeria, the standard work week consists of six days. Labour Act, Section 13 specifically mentions that the working hours can be determined by:

  • Mutual consent, 
  • Collective bargaining within the company or the concerned industry, or
  • Industrial wage board

It further states that hours exceeding the standard (8) constitute overtime. The overtime rate is decided by mutual consensus because the law doesn’t specify a standard rate.

Skyrocket Your Business with a Reliable PEO in Nigeria

Nigeria offers a mix of opportunities and risks that only an experienced PEO can deal with. The country is full of hardworking employees, but onboarding an individual without proper screening can backfire. 

Similarly, tax implications, payroll issues, and language barriers are nuisances no business wants to face, especially during its initial phase. With a reliable PEO in Nigeria on your back, you can run your business safely and smoothly.

The above list of top-notch PEOs in Nigeria should help you find a reliable partner. Yet, if you have concerns — or want to save more — contact Remote People. 

As part of our PEO broker service, we recommend the best available service — and save you up to 40% on PEO services. Contact us and explore our amazing services now.

Frequently Asked Questions

A reliable PEO in Nigeria is familiar with the local rules related to employment, income taxes, payroll, hiring, firing, and managing your employees. They are expert in finding, onboarding, and retaining the right talent for your company. From payroll processing to managing your employees, they offer a range of services to keep your business thriving. 

It is difficult to provide an exact number because pricing strategies vary from PEO to PEO. Some use a fixed-priced model, while others use a percentage-of-payroll model, bundle pricing, pay-as-you-go model, etc. 

The final cost depends upon the number of employees hired and the services expected of them.

Employee benefits vary from country to country. PEOs know what benefits meet the local standards. Benefits like retirement plans, health insurance, paid leaves, and medical funds are common. PEOs offer customized benefits based on the client’s budget and legal requirements.