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The short answer
For a Canadian resident, FGN bond coupons are foreign interest reported to the CRA in Canadian dollars in the year received. Nigerian sources describe FGN bond interest as exempt from withholding tax, so usually no Nigerian tax is deducted, which also means there is no foreign tax credit to claim: the whole coupon is taxed in Canada at your normal rate.
Federal Government of Nigeria bonds pay a fixed coupon twice a year and are popular with diaspora investors who want longer-term naira returns. For someone living in Canada, the question is not just what the coupon pays, but how much of it is left after tax in two countries. The answer turns on an exemption in Nigeria and the absence of one in Canada.
Nigeria's side: the coupon arrives untaxed
When Nigeria's tax authority directed banks in 2025 to deduct 10% withholding tax on interest from short-term securities, KPMG's summary noted that interest on federal government bonds remains exempt. In practice, an FGN bond coupon is paid without a Nigerian deduction. We could not confirm the exact provision of the Nigeria Tax Act 2025 that carries the exemption forward, so check your custodian's statement: if anything is deducted, ask why and for a receipt.
How bonds are auctioned and priced is covered in how FGN bonds work.
Canada's side: ordinary interest income
If you are resident in Canada, coupons are interest: the CRA's line 12100 page says foreign interest is reported in Canadian dollars, converted at the rate in effect when the amount arises. No Canadian exemption follows from Nigeria's. For naira, Folio S5-F4-C1 accepts a widely available, verifiable source other than the Bank of Canada if you use it consistently, and convert each coupon on its own date.
Why there is no credit
A foreign tax credit offsets tax actually paid to another country. The CRA's Folio S5-F2-C1 limits the non-business-income credit to the lesser of the foreign tax paid and the Canadian tax on that income. With no Nigerian tax paid, the credit is nil. The Nigerian exemption saves you nothing once you are taxed in Canada; it simply means Canada collects all of the tax.
Worked example
Example only. Coupon, rates and tax rate are illustrative.
| Coupon date | Naira | Example rate | CAD |
|---|---|---|---|
| March | ₦1,800,000 | ₦1,050 per CA$1 | CA$1,714.29 |
| September | ₦1,800,000 | ₦1,100 per CA$1 | CA$1,636.36 |
| Year total | ₦3,600,000 | CA$3,350.65 |
This is a ₦20,000,000 holding with an illustrative 18% coupon paid in two halves. At an example combined marginal rate of 30%, Canadian tax is about CA$1,005, with no Nigerian tax to credit. Compare a T-bill where 10% was withheld in Nigeria: the total tax is similar, but part of it goes to Nigeria first. Note how the two coupons convert to different Canadian amounts even though they are equal in naira; that is the currency effect working through your tax.
Comparing FGN bonds with Canadian options
Because Canada taxes the full coupon, the useful comparison is after Canadian tax and in the currency you will spend. A naira coupon that looks high can buy less in Canada if the naira weakens over the life of the bond, while a Canadian GIC has no currency risk but pays in Canadian dollars. If the money is meant for spending in Nigeria later, such as a house or a return, the naira return after Canadian tax is what matters; if it is meant for life in Canada, the Canadian-dollar return is. Canadian GICs against Nigerian T-bills works through that comparison for bills.
FGN Savings Bonds, sold in smaller amounts through DMO-appointed stockbroking distribution agents, pay coupons quarterly rather than twice a year, according to Nairametrics' report on the October 2026 offer, so you have four conversion dates to record instead of two. The Nigeria library explains how FGN Savings Bonds work.
Selling before maturity
If you sell a bond before it matures, the CRA's guide T4037 treats the sale of bonds and similar debt on its own line of Schedule 3, and a gain or loss can arise. The price you receive may include interest accrued since the last coupon, which is treated differently from the capital part. The naira price and the exchange rate on the purchase and sale dates both feed the result. Ask an adviser before selling a large holding.
Records and reporting checklist
- Custodian or bank statements showing each coupon and the payment date.
- Your rate source and the rate used for each coupon.
- Purchase contract notes showing price and any accrued interest paid.
- The total cost of your Nigerian investments and accounts, to check against the Form T1135 threshold.
- Any withholding receipts, in case a deduction was made.
Where Pryme fits
Pryme does not sell FGN bonds. Coupons paid to a naira account can be received on a Pryme account's naira details and held until you choose to Swap, with the rate and fee shown before you approve. For other naira returns, see T-bill interest and the CRA.
Questions people ask
Are FGN bond coupons taxable in Canada?
Yes, for a Canadian resident. They are foreign interest reported in Canadian dollars in the year received.
Is FGN bond interest exempt from tax in Nigeria?
KPMG's summary of the 2025 withholding directive describes FGN bond interest as remaining exempt. Check your custodian's statement for any deduction.
Can I claim a foreign tax credit on FGN bond coupons?
Only for Nigerian tax actually paid. If no tax was withheld, there is nothing to credit and Canada taxes the full coupon.
What happens if I sell an FGN bond before maturity?
A capital gain or loss can arise, and part of the price may be accrued interest. Both are converted to Canadian dollars at the relevant dates.
Sources
- KPMG TaxNewsFlash: Nigeria guidance on withholding tax on interest from short-term securities (Dec 2025) · accessed Oct 2026
- Nairametrics: FGN Savings Bond rates fall to 13.07%, 14.07% as October offer opens (5 Oct 2026) · accessed Oct 2026
- CRA: Income Tax Folio S5-F4-C1, Income Tax Reporting Currency (updated 27 Jun 2024) · accessed Oct 2026
- CRA: Line 12100, Interest and other investment income (modified 20 Jan 2026) · accessed Oct 2026
- CRA: Income Tax Folio S5-F2-C1, Foreign Tax Credit (modified 31 Mar 2026) · accessed Oct 2026
- CRA: Guide T4037, Capital Gains 2025 (modified 11 Feb 2026) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.