National Housing Fund (NHF) Contributions in Nigeria: Employer Guide

The National Housing Fund (NHF) is a mandatory savings scheme for Nigerian workers earning above a specified threshold. As an employer, you're required to deduct NHF contributions from qualifying employees' salaries and remit to the Federal Mortgage Bank of Nigeria (FMBN). This guide explains how NHF works and your compliance obligations.

What is the National Housing Fund?

Overview

The NHF was established by the National Housing Fund Act to:

• Provide affordable housing finance for Nigerians
• Create a pool of funds for mortgage lending
• Enable workers to own homes through subsidized loans

How It Works

1. Employees contribute monthly (deducted from salary)
2. Employers remit to FMBN
3. Contributions earn interest
4. Contributors can access low-interest mortgages

Who Must Contribute?

Employee Eligibility

Criterion	Requirement
Employment status	Nigerian worker in paid employment
Minimum age	21 years
Maximum age	60 years
Minimum salary	Basic salary ≥ minimum wage

Employer Obligations

All employers with qualifying employees must:

• Register with FMBN
• Deduct NHF from employee salaries
• Remit monthly to FMBN
• File contribution schedules

Exemptions

Limited exemptions exist:

• Employees earning below minimum wage
• Employees below 21 or above 60
• Some categories may be exempt (check current regulations)

Contribution Rate

Standard Rate

NHF Contribution = 2.5% of Basic Salary

Basic Salary	NHF (2.5%)
₦100,000	₦2,500
₦200,000	₦5,000
₦500,000	₦12,500
₦1,000,000	₦25,000

Calculation Base

NHF is calculated on basic salary only:

• Not on housing allowance
• Not on transport allowance
• Not on other allowances
• Not on total emoluments

Monthly vs Annual

Basis	Calculation
Monthly	2.5% × Monthly basic salary
Annual	2.5% × Annual basic salary

Step-by-Step Calculation

Example 1: Standard Employee

Component	Amount
Basic salary (monthly)	₦300,000
Housing allowance	₦150,000
Transport allowance	₦75,000
Other allowances	₦75,000
Total monthly salary	₦600,000
NHF (2.5% of basic only)	₦7,500

Example 2: Minimum Wage Employee

Component	Amount
Basic salary (minimum wage)	₦70,000
NHF (2.5%)	₦1,750

Example 3: Senior Executive

Component	Amount
Basic salary (monthly)	₦2,000,000
Housing allowance	₦1,000,000
Transport allowance	₦500,000
Total monthly salary	₦3,500,000
NHF (2.5% of basic only)	₦50,000

Employer Compliance

Registration

Before deducting NHF:

1. Register your company with FMBN
2. Obtain employer registration number
3. Register all qualifying employees
4. Receive employee contribution IDs

Monthly Deduction

Each month:

1. Calculate NHF for each employee
2. Deduct from salary
3. Record the deduction
4. Show on payslip

Monthly Remittance

By the end of the following month:

1. Prepare contribution schedule
2. Submit to FMBN
3. Make payment
4. Obtain receipt/confirmation

Remittance Channels

Channel	Process
Bank transfer	To designated FMBN account
Direct to FMBN	At FMBN offices
Online portal	FMBN digital platform

NHF and PAYE Interaction

Tax Treatment

NHF contributions are tax-deductible:

• Deduct NHF from gross income before calculating PAYE
• Reduces taxable income
• Reduces PAYE liability

Calculation Order

1. Determine gross income
2. Deduct CRA (Consolidated Relief Allowance)
3. Deduct NHF ←
4. Deduct pension contribution
5. Calculate taxable income
6. Apply PAYE tax bands

Example: Tax Impact

Without NHF Deduction	With NHF Deduction
Gross: ₦6,000,000	Gross: ₦6,000,000
CRA: (₦1,400,000)	CRA: (₦1,400,000)
Pension: (₦480,000)	Pension: (₦480,000)
NHF: ₦0	NHF: (₦150,000)
Taxable: ₦4,120,000	Taxable: ₦3,970,000
Tax: ~₦759,000	Tax: ~₦723,000
Tax saved:	₦36,000

Employee Benefits

Interest on Contributions

Contributions earn interest:

• Rate set by FMBN (currently around 2%)
• Credited annually
• Compounds over time

Access to NHF Loans

Contributors can access housing loans:

• Lower interest rate than commercial mortgages
• Currently around 6% per annum
• Maximum loan amount based on contribution history

Loan Eligibility

To qualify for NHF loan:

Requirement	Detail
Contribution period	Minimum 6 months continuous
Employment	Must be currently employed
Age	Must complete repayment before 60
Property	Must be for personal residence

Withdrawal/Refund

At retirement or cessation of employment:

• Contributions refunded with interest
• Processed through FMBN
• May take time—plan accordingly

Common Compliance Issues

Issue 1: Not Registering

Problem: Employing workers without FMBN registration

Consequence: Non-compliance, potential penalties

Solution: Register with FMBN before first deduction

Issue 2: Late Remittance

Problem: Deducting but remitting late

Consequence: Penalties, interest charges

Solution: Remit by deadline (end of following month)

Issue 3: Wrong Calculation Base

Problem: Calculating NHF on total salary instead of basic

Consequence: Over-deduction from employees

Solution: Always use basic salary only

Issue 4: Not Showing on Payslip

Problem: Deducting but not disclosing

Consequence: Employee disputes, compliance issues

Solution: Always itemize on payslip

Record Keeping

Required Records

Maintain for at least 6 years:

• Monthly contribution schedules
• Remittance receipts
• Employee contribution records
• FMBN correspondence

Employee Records

For each employee, track:

• Contribution ID
• Monthly contributions
• Cumulative contributions
• Any changes in basic salary

How Finora Handles NHF

Automatic Calculation

Finora calculates NHF automatically:

• Set up employee basic salary
• System applies 2.5% rate
• Calculated with each payroll run

Payroll Integration

NHF flows through payroll:

• Deducted from gross
• Applied before PAYE calculation
• Shown on payslip
• Tracked per employee

Remittance Reports

Generate FMBN-ready reports:

• Monthly contribution schedule
• Employee-by-employee breakdown
• Total remittance amount
• Ready for submission

Year-End Summary

Annual reports showing:

• Total NHF per employee
• Company-wide total
• Reconciliation support

Frequently Asked Questions

Is NHF mandatory for all employers?

Yes, for employers with qualifying employees (Nigerian workers aged 21-60 earning at least minimum wage).

What if an employee doesn't want to contribute?

NHF is mandatory—employee preference doesn't exempt them. Deduction is required by law.

Can employees contribute more than 2.5%?

The mandatory rate is 2.5%. Voluntary additional contributions may be possible—check with FMBN.

What happens to contributions if an employee changes jobs?

Contributions remain with FMBN under the employee's ID. New employer continues contributing to the same account.

Is there a maximum contribution?

No ceiling. NHF is always 2.5% of basic salary regardless of amount.

Penalties for Non-Compliance

Employer Penalties

Offense	Potential Penalty
Failure to register	Fines and enforcement action
Non-deduction	Liable for unremitted amounts
Late remittance	Interest charges
Non-remittance	Fines plus amounts owed

Protecting Your Business

• Register with FMBN
• Deduct accurately each month
• Remit on time
• Keep complete records
• Use payroll software that handles NHF

Conclusion

NHF is a mandatory contribution for Nigerian workers that provides:

• Affordable housing finance opportunity
• Tax deduction benefit
• Long-term savings with interest

Employers must:

• Register with FMBN
• Deduct 2.5% of basic salary
• Remit monthly
• Maintain proper records

Finora automates NHF calculations, integrates with payroll, and generates remittance reports—ensuring you stay compliant with minimal effort.

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