Banks alert customers as FIRS reaffirms 10% tax on fixed-income interest

By Chinwendu Obienyi

Banks have begun notifying customers after the Federal Inland Revenue Service (FIRS) reiterated its policy enforcing a 10 per cent withholding tax on interest earned from a broad range of fixed-income securities, Daily Sun on Wednesday learnt.

This move highlights renewed regulatory attention on one of the country’s most active financial markets.

Daily Sun earlier reported that investment firms had begun implementing a mandatory 10 per cent Withholding Tax (WHT) on interest earned from short-term securities.

Hence, banks which serve as intermediaries for calculating, withholding and remitting the tax, have urged customers to seek guidance from their relationship managers. Financial institutions typically face significant operational responsibilities in complying with FIRS rules, and clear communication helps mitigate disputes related to expected returns or settlement calculations.

In a notice to its customers, Access Bank said 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. Federal Government of Nigeria (FGN) bonds and Open Market Operation (OMO) bills remain exempt, preserving a long-standing incentive that makes sovereign securities more attractive to investors seeking tax-efficient yields.

“FIRS recently reiterated the policy on 10 per cent WHT deduction which applies on interest earned from new and existing treasury bills, corporate bonds, promissory notes, bills of exchange and other similar securities. Federal government bonds and OMO bills are exempt from this rule. For enquiries, please reach out to your relationship officer”, the bank said.

Although the withholding tax provision is not new, the FIRS reminder signals an intensified focus on compliance as authorities work to boost non-oil revenue. President Bola Tinubu’s administration has placed tax consolidation at the center of its fiscal strategy, and the fixed-income market, given its size, liquidity and transparency, offers a significant opportunity for improving collections.

The renewed enforcement comes at a pivotal moment for Nigeria’s debt markets. Rising inflation, exchange-rate volatility and monetary tightening by the Central Bank of Nigeria (CBN) have pushed yields higher across short-term government paper, drawing increased participation from fund managers, banks and corporates. With interest rates elevated, clarity on net returns after tax has taken on greater importance for investors recalibrating their portfolios.

Analysts say the FIRS restatement could subtly shift demand dynamics across fixed-income categories. The continued exemption for FGN bonds and OMO bills effectively boosts their relative attractiveness, particularly for institutional investors such as pension funds and insurance firms that actively manage tax exposure.

Corporate issuers, already grappling with higher borrowing costs, may face added pressure if investors demand higher pre-tax yields to offset the withholding burden.

The policy reminder also arrives as Nigeria navigates a complex macroeconomic adjustment program. A weaker naira, ongoing reforms in the energy sector and shifts in monetary policy have intensified scrutiny of the government’s revenue position. The FIRS, under pressure to strengthen compliance, has increasingly engaged commercial banks, capital-market operators and large corporates to ensure more consistent tax remittance.

For investors, the message is straightforward: tax obligations must be incorporated into return expectations, especially as market yields continue to fluctuate. With regulatory enforcement tightening, participants across Nigeria’s fixed-income landscape may need to revisit investment strategies, pricing models and risk-adjusted return thresholds in the months ahead.