Nigerian Banks Notify Customers on Implementation of 10% Withholding Tax
- The FIRS has reiterated its policy enforcing a 10% withholding tax on interest earned from fixed-income securities
- Banks have started informing customers and advising them to seek clarification on how the tax affects their returns
- Interest from Treasury bills, corporate bonds and similar instruments is taxable, while FGN bonds and OMO bills remain exempt
Oluwatobi Odeyinka is a business editor at Legit.ng covering energy, the money market, tech and macroeconomic trends in Nigeria.
Nigerians have reportedly started receiving notifications from their banks notifying them about the 10% withholding tax on interest earned from fixed-income securities.
Although the withholding tax is not new, the notifications follow a recent announcement by the Federal Inland Revenue Service (FIRS) regarding its commitment to enforcing it, Daily Sun reported.
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Banks, which are responsible for calculating, withholding and remitting the tax, have reportedly notified their customers, advising them to consult their relationship managers for clarification. Such clarification is necessary to avoid disputes over payouts and settlement figures.
According to earlier reports, some investment firms had already started applying the mandatory 10% deduction on interest from short-term securities.
One of such banks that has notified its investor-customers is Access Bank, which explained that the tax applies to interest income from both new and existing Treasury bills, corporate bonds, promissory notes, bills of exchange and similar money-market instruments.
However, interest earned from Federal Government of Nigeria (FGN) bonds and Open Market Operation (OMO) bills are exempted from the tax.
The FIRS directive indicates a renewed push for compliance as the government works to strengthen non-oil revenue. The Tinubu-led administration has consistently emphasised tax reforms and improved collection as part of its broader fiscal strategy.
The development also comes at a time of significant policy adjustments and increasing interest in Nigeria’s debt market.
Market analysts note that the FIRS reminder could influence demand patterns across various fixed-income products. The continued tax exemption for FGN bonds and OMO bills may improve their appeal, especially among institutional investors such as pension funds and insurers that closely monitor tax exposure.
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Meanwhile, corporate issuers may encounter added challenges if investors begin to seek higher pre-tax yields to cushion the impact of the withholding tax.
The enforcement update arrives amid broader economic adjustments and anticipation of the implementation of these reforms in the coming year.
The federal government is yet to present the 2026 budget, which will contain revenue targets and national economic priorities.
Legit.ng reported that the government had broken down its economic strategy into four pillars: fiscal flexibility, policy coherence, institutional strength and human capital adaptability.
New tax laws to take effect in 2026
Legit.ng reported that President Bola Tinubu’s administration has embarked on a taxation overhaul in its efforts to rebuild public finances. The administration has introduced four new tax laws that will take effect on January 1, 2025.
The four bills, which have now been signed into law, include the Nigeria tax bill, the Nigeria tax administration bill, the Nigeria revenue service (establishment) bill, and the joint revenue board (establishment) bill.
The new tax laws offer exemptions and reliefs to low-income earners and small businesses, while streamlining collection and compliance procedures.
Source: Legit.ng
