October 30, 2025/CSL Report
- Authorities have reiterated the directive to reintroduce a 10% withholding tax (WHT) on short-term securities.
- The directive is expected to have a mixed impact across different market segments; however, overall demand for short-term instruments may weaken, while yields could experience a modest upward adjustment.
- With Federal Government bonds remaining exempt from WHT, we continue to maintain our recommendation to extend duration and position at the long end of the yield curve.
The Federal Inland Revenue Service (FIRS) has restated its directive requiring banks, stockbrokers, and other financial institutions to deduct a 10% WHT on interest income earned from short-term securities such as treasury bills, promissory notes, and corporate bonds. The directive, initially issued last month, emphasises that non-compliance will attract penalties and interest charges under existing tax laws. Under this framework, the tax will be deducted at the point of payment, meaning investors will receive returns net of withholding tax. We view the reintroduction of the WHT on short-term securities as a strategic decision by the government to broaden its non-oil revenue base and reduce fiscal vulnerabilities.
Based on our estimates, the reintroduction could add close to 1% of GDP to total fiscal revenues, thereby helping to boost public finances and support ongoing fiscal consolidation efforts. That said, implementation clarity remains a concern, particularly regarding whether the tax will be applied retrospectively, which could create compliance and liquidity challenges for investors, or prospectively, which would allow the market to adjust more smoothly
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CSL Fixed Income and Strategy Report – Policy Shift.pdf
