Nigeria’s new tax law is already translating into higher take-home pay for several formal sector workers, with January salaries reflecting reduced Pay-As-You-Earn (PAYE) deductions, according to early payroll data and human resource managers.
The changes, introduced under reforms led by the Presidential Committee on Fiscal Policy and Tax Reforms chaired by Taiwo Oyedele, increased the annual tax-free threshold to N800,000. This means workers earning about N66,700 monthly are now fully exempt from PAYE, while higher earners are taxed under revised progressive rates ranging from 15 percent to 25 percent.
Human resource professionals say the changes have translated into immediate relief for low-income earners and higher disposable income for a significant number of formally employed Nigerians.
Adekunle Ishola, a human resources manager and payroll expert, said the effect was visible as soon as January payrolls were processed.
“More than 65 percent of our workforce paid less tax in January compared with December,” Ishola said, attributing the drop to the application of the revised tax bands.
Ishola added that while employers initially faced technical challenges adjusting payroll systems to the new structure, these were resolved after engaging tax advisers, allowing companies to implement the reforms within the first month.
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Beyond lower rates, the tax overhaul has broadened exemptions and reliefs. Workers earning the national minimum wage or less are now fully exempt from PAYE, while individuals earning up to N1.2 million annually pay no personal income tax. Pension contributions, gifts, and certain allowances have also been excluded from taxable income.
The reforms also introduced a rent relief, allowing taxpayers to deduct 20 percent of annual rent capped at N500,000 from taxable income. Government officials say the measure is intended to ease cost-of-living pressures, particularly for urban workers facing rising housing costs.
Melville Ogbeama, a human resource specialist, said the changes reflect a shift toward fairness in the tax system.
By lowering the burden on low- and middle-income earners, he explained, the reforms increase take-home pay for workers earning up to N20 million annually, a move expected to support household consumption at a time of elevated inflation.
Four workers told BusinessDay they took home more pay in January after PAYE deductions.
“My paycheck increased by N5,000 this January,” Animashaun Omoniyi, a wealth manager, said.
He added that the increase was just 0.71 percent, highlighting the marginal increment in his net salary.
Olukunle Tanimowo, a transfer pricing expert in a reputable firm in Lagos, said: “I applied for the rent relief using my tenancy agreement, as per the new tax law. As a result, my take-home pay increased by approximately N11,000 compared to the previous month.”
Victory, a writer who refused to volunteer her last name, explained that her salary equally witnessed a slight increase as her employer demanded more details, including her home address.
An anonymous worker at AutoChek, an automobile start-up in Nigeria, reported that he had an increase in his net salary after PAYE deductions.
Social media reactions
The reforms have already prompted reactions on social media.
Blessing Olutoye, an investment banker, said: “Salary dropped, and my net increased, I now pay less tax.”
Similarly, another user, @oabdulhafis, wrote: “My net increased, and there were no funny deductions from my salary. People should stop spreading misinformation.”
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@Aztecccz said, “This is what I was talking about yesterday, about how lived experience will tell the real story beyond the lies and propaganda. Someone who sees their take-home increase simply wouldn’t buy the agenda that says otherwise.”
These comments show the immediate impact on workers who had feared the reform might reduce take-home pay.
Mixed reactions by high-income earners
For higher-income earners, the outcomes have been mixed.
Seyifunmi Oderinde, an HR specialist, cited an organisation of about 300 employees where roughly 80 percent saw tax reductions, while around 20 percent, mainly those earning strong seven-figure incomes, paid more.
While lower bands benefit from exemptions and reduced rates, individuals in upper income brackets face higher marginal tax rates, a shift that has revived debate over public service delivery and the judicious use of additional revenue.
With Nigeria’s headline inflation easing to 15.15 percent in December, according to official data, economic growth projections for 2026 remains positive, strengthening the government’s case that targeted tax relief can coexist with macroeconomic stability.
Still, implementation has not been frictionless. Employers say interpreting new guidelines, updating payroll systems, and aligning reporting requirements have required additional time and professional support, particularly in the early weeks of the rollout.