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National Housing Fund (NHF) deduction no longer compulsory for Private Sector Employees, How do you get your refund?

Employees of private sector organizations in Nigeria are no longer mandated to contribute 2.5% of their monthly basic salary into the National Housing Fund (NHF).

This was disclosed in a circular issued by the Director General of the Nigeria Employers’ Consultative Association (NECA) to all member companies, titled, “Amendment of the National Housing Fund Act and Contribution into the National Housing Fund (NHF)”. The Circular was issued sequel to the signing of the Business Facilitation Act (BFA) 2022 by President Muhammadu Buhari in February 2023. The Circular seeks to implement the amendments of the BFA to the National Housing Fund Act 1992, particularly with reference to the regulation of contributions made to the NHF by private sector employers of labour in Nigeria.

By the issuance of this circular, only employees earning the national minimum wage and above in the public sector, and self-employed individuals are required to contribute 2.5% of their monthly income to the NHF. Consequently, private sector employees are now excluded from compulsory compliance with this obligation and may hence forth contribute the 2.5% of their monthly income to the NHF voluntarily if they choose to.

The National Housing Fund (NHF) was established by the NHF Act of 1992 to mobilise funds that will facilitate the provision of affordable houses for Nigerians. Under the NHF Act, every Nigerian in the public and private sector earning an equivalent of the National Minimum Wage or above is required to contribute 2.5% of their monthly basic salary into the NHF managed and administered by the Federal Mortgage Bank of Nigeria (the “Bank”). The funds mobilized is then made available through the Bank to contributors at affordable interest rates to own houses. By the Act, employers of labour are required to deduct, at source, the prescribed rate of contribution from the monthly salaries of qualifying employees and remit same to the Bank. The above requirement has now been altered by section 45 of the BFA which in effect, amends section 4 of the NHF Act of 1992 and consequently, employees of private sector organisations are no longer mandated to contribute but can choose to contribute voluntarily.

For those private sector employees who choose to remain contributors of the NHF, the Circular directs their employers to continue to deduct the prescribed rate at source and make remittances to the Federal Mortgage Bank of Nigeria (FMBN). For employees in the private sector who are current contributors but choose to exercise their right to opt out, the employers are directed to inform such employees to process their refund as provided under the NHF Act.

Processing Refund under NHF Act

Under the NHF Act, any contributor who has not obtained a housing loan under NHF through Federal Mortgage Bank of Nigeria (FMBN) and has attained the age of 60 years; or retired from his employment and becomes incapable of continuing the contribution to the Fund, shall be eligible to a refund of his contribution within three months of the application at the rate of interest prescribed for contributions under NHF.

Considering the fact that the provision for refund under the NHF Act is only available at retirement or incapacitation, it is expected that the Federal Mortgage Bank of Nigeria (FMBN) will issue subsequent guidance or practice directives as regards employees who choose to opt out of the contribution or confirm specifically that they have to wait till retirement before they can get their refund.

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