Banks Notify Customers as FIRS Enforces 10% Withholding Tax on Fixed-Income Interest

Banks across the country have begun issuing formal notifications to customers following the Federal Inland Revenue Service’s (FIRS) renewed enforcement of a 10 per cent withholding tax (WHT) on interest earned from a wide range of fixed-income securities. It was gathered on Wednesday that the move has triggered heightened activity within Nigeria’s financial markets as institutions work to align with the updated compliance directive.

According to industry sources, several investment firms have already started deducting and remitting the mandatory 10 per cent WHT on interest payments from short-term instruments, signalling a full return to stringent regulatory oversight. The enforcement applies to various fixed-income products that have grown increasingly popular among both retail and institutional investors.

Banks, which act as key intermediaries in calculating, withholding, and remitting the tax on behalf of clients, have been advising customers to engage their relationship managers for clarification on how the directive may affect their earnings. Financial experts note that clear communication is essential to avoid future disputes, especially as customers reconcile interest returns, settlement figures, and yield calculations amid the new deductions.

In a notification to its customers, Access Bank stated that the withholding tax applies to interest income from both new and existing Treasury Bills, corporate bonds, promissory notes, bills of exchange, and other similar money-market instruments. The bank emphasised that the enforcement covers securities regardless of tenure or date of issuance.

However, the bank clarified that Federal Government of Nigeria (FGN) bonds and Open Market Operation (OMO) bills remain exempt from the withholding tax.

This exemption preserves a long-standing policy designed to make government-issued securities more attractive by offering tax-efficient investment options. Experts say this will likely influence portfolio shifts among investors prioritising net returns over gross yields.

Market analysts note that the renewed enforcement underscores FIRS’s drive to boost tax revenue and close compliance gaps within the financial sector. Fixed-income securities represent one of the most active investment classes in Nigeria, with billions of naira traded weekly. As such, ensuring proper tax collection on interest income could significantly improve federally retained revenues at a time of fiscal pressure.

The enforcement is also expected to reshape investor behaviour, particularly among short-term traders and corporate treasurers who often rely on Treasury bills and commercial papers for liquidity management. Some may adjust their strategies toward longer-term FGN bonds or OMO instruments to maximise tax exemptions.

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Financial institutions are meanwhile recalibrating internal systems to ensure accurate tax handling, given the operational responsibilities involved in withholding, reporting, and remittance. Banks emphasise that compliance is not optional and that customers should review their portfolios to understand the impact on expected cash flows.

As the directive takes full effect, stakeholders anticipate increased engagement between banks, investment houses, and clients seeking clarity on the implications for yields, reinvestments, and overall portfolio performance. The FIRS has not ruled out further compliance reviews, signalling sustained regulatory vigilance within the fixed-income market.