FIRS Orders Banks to Deduct Withholding Tax on Short Term Investments

posted on Oct 30, 2025

How the new tax directive could affect your investment returns and what you can do about it

 The Federal Inland Revenue Service (FIRS) has issued a new directive that changes how Nigerians earn income from short term investments. Under this policy, banks and other financial institutions are now required to deduct 10 percent withholding tax from all interest payments made on short term investment securities before paying investors their returns.

This directive affects individuals and businesses that earn interest on instruments like treasury bills, corporate bonds, promissory notes, and fixed deposits. For many Nigerians, these investments are a safe and predictable way to grow their money. But with this new tax, investors may notice a slight drop in their investment returns.

At a time when inflation is high and financial planning is more important than ever, understanding how this policy works — and how it affects your earnings — can help you stay ahead.

What Withholding Tax Means for Investors

Withholding tax is not a new concept in Nigeria. It’s a type of advance tax deducted directly from your income at the point of payment. The money deducted is then remitted to the Federal Inland Revenue Service on your behalf.

Here’s how it plays out for short term investments: if you were expecting ₦100,000 as interest on your fixed deposit, the bank will now deduct ₦10,000 (10%) as withholding tax, and you’ll receive ₦90,000.

The directive also specifies that banks and financial institutions must remit the tax to the FIRS by the 21st day of the month following the payment date. This applies to interest payments made to individuals, companies, and non-corporate entities.

However, there’s good news for some investors: Federal Government Bonds and Central Bank Open Market Operations (OMO) bills remain tax-exempt. This means those who hold these instruments will continue to receive their full interest without deductions.

How This Affects Page Financials Customers

If you currently have short term investments or plan to invest soon, this change could affect how much you earn in net interest income.
At Page Financials, we understand that every percentage point matters, especially when it comes to your financial goals.

Here’s what you should do next:

1. Review your investment portfolio.
   Take a closer look at where your funds are currently placed. Identify which of your short term instruments will now attract the 10 percent withholding tax.

2. Ask questions before reinvesting.
   Before renewing or opening a new fixed deposit, confirm the impact of the tax on your expected returns. Transparency helps you plan better.

3. Explore alternative investments.
   Page Financials offers various investment products in Nigeria that help you balance returns with flexibility. Our advisors can guide you toward options that remain competitive even under the new tax rule.

4. Plan for long-term growth.
   While short term securities are great for quick liquidity, diversifying into longer-term or tax-exempt instruments can help protect your earnings and create consistent growth.

The Bigger Picture

The new FIRS directive is part of the government’s broader effort to strengthen Nigeria’s tax system and improve revenue generation. President Bola Ahmed Tinubu recently signed four new tax reform bills into law, expected to take effect from January 2026. These reforms aim to make taxation fairer and more efficient — but they also mean investors must stay informed and adaptable.

For many Nigerians, this policy may seem like another reduction in their hard-earned returns. But in truth, it’s also a reminder that financial literacy and proactive investment management are more important than ever.

At Page Financials, we remain focused on helping you navigate these changes with confidence. Whether you’re looking to grow your savings, explore smart investment options in Nigeria, or simply understand how tax policies affect your portfolio, we’re here to guide you every step of the way.

Final Thoughts

Change is constant in finance — but smart decisions make all the difference. The withholding tax on short term investments might reduce your earnings slightly, but it shouldn’t stop your financial growth.

With the right guidance, you can still make your money work harder, diversify your investments, and plan for a future that aligns with your goals.

At Page Financials, we’ll continue to provide insights, tools, and opportunities that help you make informed choices and stay financially secure — no matter what changes tomorrow brings.

Stay informed. Stay empowered. Stay financially confident with Page Financials.