New Minimum Wage Practically Tax-Free for Workers

Nigerian workers earning the recently approved national minimum wage of ₦70,000 are expected to pay only a token in personal income tax, with analysis showing that the new wage is almost entirely tax-free.

The ₦70,000 monthly salary amounts to ₦840,000 annually, just slightly above the tax-free threshold of ₦800,000. This leaves only ₦40,000 taxable within a year.

At the prevailing rate of 15 per cent, the tax liability on that sum is ₦6,000 annually, which translates to about ₦500 monthly.

In practical terms, minimum wage earners will retain nearly all of their income. Allowable deductions such as pension contributions, rent reliefs and other statutory exemptions are expected to further reduce, and in many cases eliminate, their tax obligations.

The introduction of the ₦70,000 wage followed negotiations between the Federal Government and organised labour as part of measures to cushion the impact of inflation and the rising cost of living.

Analysts say the fact that workers on the minimum wage will take home almost their full salary strengthens the intent of the wage review, ensuring that the increase translates into real value for households at the lower end of the income ladder.