Banks Alert Customers as FIRS Intensifies Enforcement of 10% Tax on Fixed-Income Interest
Nigerian banks have begun issuing fresh alerts to customers after the Federal Inland Revenue Service (FIRS) reaffirmed the enforcement of a 10% withholding tax on interest earned from a wide range of fixed-income investments. The renewed directive has drawn attention across financial circles, underscoring regulatory efforts to tighten compliance in one of the country’s most active markets. Daily Sun gathered that the reminder has prompted banks to clarify how the policy affects customer returns, especially as implementation becomes more visible.
Access Bank, in a notice to its customers, explained that the tax applies to interest on both new and existing Treasury Bills, corporate bonds, bills of exchange, promissory notes and similar money-market instruments. However, Federal Government of Nigeria (FGN) bonds and Open Market Operation (OMO) bills remain exempt—maintaining an incentive that has long made sovereign securities attractive to investors seeking tax-efficient yields. Banks have advised customers to consult their relationship managers for guidance in navigating expected returns under the updated compliance environment.
Although the withholding tax rule is not new, the FIRS decision to reiterate and enforce it reflects the government’s push to boost non-oil revenue. President Bola Tinubu’s administration continues to prioritize tax consolidation as part of its fiscal strategy, and the fixed-income market—given its large size and transparency—presents significant potential for improving tax collection. The renewed enforcement comes at a time when inflation, exchange-rate volatility, and rising interest rates have drawn more investors into short-term government securities.
Analysts say the shift may reshape investment behavior, as exempt instruments like FGN bonds and OMO bills could see stronger demand due to their tax advantages. Corporate issuers, meanwhile, may face tougher conditions as investors seek higher pre-tax yields to offset the withholding burden. With borrowing costs already elevated, companies may need to rethink their financing and pricing strategies in response to shifting market preferences.
As Nigeria navigates a complex economic adjustment marked by currency pressures, energy reforms and changing monetary policies, the FIRS is intensifying collaboration with banks and capital-market operators to strengthen compliance. For investors, the directive is a reminder to factor tax obligations into return calculations. With regulatory scrutiny rising, market participants may need to reassess portfolio strategies and risk-adjusted expectations to match evolving conditions in the months ahead.
source: The sun