FIRS orders banks and brokers to deduct 10% withholding tax on interest from treasury bills, bonds, and other short-term investments from 2025.
The Federal Inland Revenue Service (FIRS) has announced a new 10% Withholding Tax (WHT) on interest earned from short-term securities, directing banks, stockbrokers, and financial institutions to begin automatic deductions at payment points.
The move, outlined in a circular released this week, marks a significant policy shift aimed at broadening Nigeria’s tax base and improving domestic revenue mobilization. The new measure covers treasury bills, corporate bonds, promissory notes, and bills of exchange — ending a long-standing exemption policy designed to encourage investor participation in local markets.
Under the directive, all relevant financial institutions, including discount houses, primary dealer market makers, corporate bond issuers, and government agencies, must deduct the 10% tax before crediting investors. The FIRS cited Sections 78(1) and 81(1) of the Companies Income Tax Act and the 2024 Withholding Tax Regulations as the legal basis for the change.
Interest from Federal Government bonds will, however, remain exempt from the new tax. The agency explained that investors may receive tax credits for withheld amounts unless the deduction represents a final tax obligation.
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FIRS Executive Chairman Zacch Adedeji stressed strict enforcement, warning that failure to comply would attract penalties and interest under existing laws. “All relevant interest-payers are required to comply with this circular to avoid sanctions,” he stated.
Withholding tax is a prepayment system where a portion of income is deducted at source before remittance to the tax authority. In Nigeria, standard WHT rates include 10% on rents, dividends, and interest, and 5% on royalties.
Analysts say the new policy could reshape Nigeria’s short-term investment landscape, particularly for investors drawn to liquid assets such as treasury bills and corporate notes. Some market watchers predict a slight dip in demand for these instruments, though others see potential long-term gains for government revenue diversification.
The FIRS did not disclose revenue projections but described the policy as part of ongoing efforts to strengthen fiscal transparency, reduce evasion, and ensure fairness within the tax system.
Financial experts argue that, while the measure may tighten yields in the short term, it could improve compliance culture and enhance confidence in Nigeria’s evolving fiscal framework — a key priority as the country seeks more sustainable revenue sources.
Africa Daily News, New York
