The Federal Inland Revenue Service (FIRS) has directed banks, discount houses, stockbrokers, and other financial institutions to deduct withholding tax (WHT) from all interest payments on short-term investment securities.
Gatekeepers Newsreports that Withholding tax is an advance payment deducted at source from certain categories of income, including rents, dividends, interest, and royalties, before remittance to the tax authorities. The applicable rates under Nigerian law are 10% for rents, dividends, and interest, and 5% for royalties.
In a public notice dated September 19, 2025, Zacch Adedeji, Chairman of the FIRS, said the directive applies to all banks, corporate bond issuers, primary dealer market makers (PDMMs), government agencies, tax practitioners, and the general public.
Adedeji said the deduction should be made on the date of payment and remitted to the relevant tax authority by the 21st day of the following month.
“Sections 78(1) and 81(1) of the Companies Income Tax Act (CITA), as amended, and the Deduction of Tax at Source (Withholding) Regulations, 2024, provide that tax be deducted from interests payable to any person, including non-corporate entities, on the date of payment,” he explained.
He added that individuals or entities from whom such taxes are deducted are entitled to a tax credit equal to the amount withheld and remitted, except in cases where the deduction represents a final tax.
However, the FIRS clarified that interest on Open Market Operation (OMO) bills issued by the Central Bank of Nigeria (CBN) and federal government bonds remain exempt from the withholding tax.
“Short-term securities include, but are not limited to, government bonds, treasury bills, promissory notes, corporate bonds, financial papers, and bills of exchange,” the notice stated.
The agency urged all financial institutions and relevant payers to ensure full compliance to avoid penalties and interest charges stipulated in the tax laws.
The directive comes as Nigeria continues to restructure its tax system to boost revenue and improve fiscal sustainability. President Bola Tinubu had earlier signed four tax reform bills into law on June 26, 2025, with the new measures set to take effect from January 2026.
