The Federal Inland Revenue Service (FIRS) has introduced a 10 % withholding tax on interest earned from investments in short‑term securities, effective immediately. Announced on Tuesday, the directive applies to instruments such as treasury bills, corporate bonds, promissory notes and bills of exchange. Previously, short‑term bills were exempt from tax to encourage investment and boost returns for investors.
Under the new regime, financial institutions—including banks and stockbrokers—must deduct the 10 % tax at the point of payment. Investors will receive tax credits for the amounts withheld, unless the deduction is a final tax. Interest on federal government bonds, however, remains exempt from the levy.
FIRS Executive Chairman Zacch Adedeji warned that all relevant interest payers must comply with the directive to avoid penalties and interest as stipulated in the tax law. The measure is expected to generate additional revenue for the federal government, although the exact amount has not been disclosed.
Short‑term securities have been popular among yield‑hungry investors because of their attractive interest rates and brief maturity periods. The introduction of the withholding tax may affect investor appetite for these instruments, potentially influencing the overall investment landscape. The Nigerian government, seeking to diversify revenue streams and reduce dependence on oil, sees the tax as part of that effort.
As the government aims to boost revenue, investors will need to adjust their strategies to account for the new tax regime. The FIRS has emphasized the importance of compliance, warning that failure to do so may result in penalties and interest. How the withholding tax will impact the Nigerian economy and investment market remains to be seen as investors and financial institutions navigate this new environment.
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