Graduate offer letters in Nigeria often quote an annual package rather than a monthly salary. This example uses a package many graduates start on, to show what actually lands in an account each month.
These bands have applied since 1 Jan 2026, and the PAYE calculator runs the same ones for any figure entered, pension included.
The worked example
Starting from ₦4,000,000 a year gross. Most employees also have a pension contribution deducted before PAYE, commonly 8% of gross pay, which is the default this guide and the calculator both use; check your own offer or payslip for the rate that actually applies to you.
- Gross package: ₦4,000,000 a year.
- Pension at 8%: ₦320,000.
- Taxable income: ₦3,680,000.
Applying the bands to the taxable figure:
- First ₦800,000: nothing.
- Remaining ₦2,200,000, taxed at 15% on income from ₦800,001 to ₦3 million: ₦330,000, which uses up that whole band.
- Remaining ₦680,000, taxed at 18% on income from ₦3 million to ₦12 million: ₦122,400.
From yearly package to monthly take-home
Add ₦330,000 and ₦122,400 for a yearly tax of ₦452,400 in this example. Take-home pay is gross less pension less PAYE: ₦4,000,000 minus ₦320,000 minus ₦452,400, or ₦3,227,600 a year, close to ₦268,970 a month if the package is paid in equal monthly instalments.
Without pension, for comparison
Applying the bands straight to the ₦4,000,000 gross, with no pension taken off first, would give a bigger tax bill of ₦510,000 a year instead of ₦452,400. The gap is what the pension contribution saves in tax by reducing the taxable figure first.
Why the offer letter figure isn't the take-home figure
An annual package quoted in an offer letter is almost always the gross figure, before pension, PAYE and any other statutory deductions. The naira actually paid into an account each month is smaller once both are applied, as this example shows.
This matters most when comparing two offers with different package structures, since a higher headline figure does not always mean a proportionally higher take-home amount once each is run through the same bands.
Comparing this to a monthly-salary example
Framed as a monthly salary instead of an annual package, this figure sits close to a smaller monthly salary example, which reaches the same two bands after its own pension deduction. The method is identical either way; only how the number is first presented differs. See how PAYE is calculated step by step for that shared method on its own.
What this example still leaves out
Pension is the one deduction this example applies, since it is the calculator's default. Rent relief and other reliefs are not included, since an offer letter rarely spells out how they would apply to a specific package. A payroll or tax adviser can confirm which of those fit a specific offer, and it is a reasonable question to raise before accepting one.
Checking the bands behind this example
The bands used here are set out in full in the 2026 PAYE bands explained, alongside the rest of this series, including examples at several salary levels, in the PAYE and state tax hub.