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The short answer
A loan from a US parent to its Nigerian subsidiary needs three things checked: Nigeria limits deductible connected-party interest to 30% of EBITDA (excess carried forward up to five years), interest paid to a non-resident lender suffers 10% withholding tax, and the inflow should be documented with a Certificate of Capital Importation so interest and principal can later be repatriated through an authorised dealer bank.
Funding a new Nigerian subsidiary with a loan rather than share capital is common: it can be repaid without a capital reduction, and interest is a cost to the subsidiary. Nigeria has rules on how much of that interest is deductible, what tax is withheld when it is paid, and how the money gets back out. The US side cares that the interest rate is arm's length. This guide covers each in order, as at October 2026; it is information, not advice.
Interest deductibility in Nigeria: 30% of EBITDA
PwC's Nigeria summaries (reviewed 29 May 2026) say Nigeria has no thin capitalisation rules as such. Instead, interest deductibility limits on loans from foreign connected parties came in under the Finance Act 2019, and the Nigeria Tax Act, effective 1 January 2026, extends the limit to local connected parties. Deductible interest on connected-party debt is capped at 30% of EBITDA, and excess interest can be carried forward for up to five years. The rules also catch third-party debt guaranteed, explicitly or implicitly, by a connected person, so a bank loan to the subsidiary backed by a parent guarantee is inside the limit.
Worked example of the limit
Figures are examples only. The subsidiary's EBITDA for the year is ₦150,000,000 and it accrues ₦60,000,000 of interest on the parent loan.
| Item | Amount |
|---|---|
| EBITDA | ₦150,000,000 |
| 30% cap | ₦45,000,000 |
| Interest accrued | ₦60,000,000 |
| Deductible this year | ₦45,000,000 |
| Carried forward (up to five years) | ₦15,000,000 |
Withholding tax on interest paid to the US
PwC's withholding tax table shows 10% on interest paid to non-resident companies. The IRS treaty list shows no US income tax treaty with Nigeria, so there is no treaty rate to reduce that. Continuing the example in dollars: on a $500,000 loan at an example 8% rate, annual interest is $40,000; 10% withholding is $4,000, and the parent receives $36,000. Whether the parent can claim a US foreign tax credit for the $4,000 is a question for its US adviser.
Tax deducted has to be remitted and a receipt obtained. Mondaq's guide on repatriation notes that tax clearance is needed to remit dividends and interest, so keep the withholding receipt with the loan file.
The CCI: document the money coming in
A Certificate of Capital Importation is issued by an authorised dealer, usually the commercial bank receiving the funds, on behalf of the Central Bank of Nigeria. Mondaq (19 September 2024) describes it as issued within 24 hours of the inflow and as the document that enables repatriation of loan interest and capital, dividends, and sale or liquidation proceeds in a convertible currency. A Templars FAQ (c. 2020) says the CCI is not mandatory but that without it an investor cannot access the official FX market for repatriation. Pavestones' summary of the CBN Foreign Exchange Manual effective 1 June 2026 says eCCI capital is registered within 24 to 48 hours of inflow.
- Send the loan in foreign currency through the bank that will issue the CCI, and ask for the CCI as the funds land.
- Make sure the CCI describes the funds as a loan, not equity, and matches the loan agreement amount.
- Keep the loan agreement, board approvals, the CCI and the bank advice together.
- Register the company with NIPC if it has foreign participation; NIPC's FAQ lists the CCI among documents for that process.
The US side and currency choice
Under Section 482 the IRS can adjust income between commonly controlled companies so it matches what uncontrolled parties would have reached, so the interest rate needs a defensible basis. The currency of the loan also matters. A dollar loan leaves currency risk with the Nigerian subsidiary; a naira loan moves it to the parent, and under Section 988 a debt instrument denominated in a nonfunctional currency is a Section 988 transaction, so exchange movements on principal and interest produce ordinary gain or loss for the parent. See FX gains and losses on naira balances.
Loan or share capital?
The comparison is worth doing on paper before funding. Interest on a parent loan reduces the subsidiary's taxable profit, but only up to the 30% of EBITDA cap, and the parent still suffers 10% withholding on what it receives. Profit returned as a dividend has already borne company income tax and then suffers 10% withholding on payment. A start-up subsidiary that makes losses for its first years gets little immediate benefit from deductible interest, while the withholding on any interest actually paid still applies. Many groups use a mix, and both routes need a CCI so the money can come back out.
What to check first
- Loan agreement signed before funds move, with rate, currency and repayment terms.
- Arm's length support for the rate from an adviser.
- CCI issued for the inflow and filed with the agreement.
- Projected EBITDA checked against the 30% cap so unusable interest is expected.
- Withholding tax process agreed with the Nigerian finance team before the first interest date.
Where Pryme fits
For the day-to-day side, a Pryme Business Account holds USD and NGN, and Swap shows the rate and fee before you approve any conversion. The CCI itself comes from the authorised dealer bank that receives the capital, so ask that bank first. The Compliance agent can keep interest dates and withholding deadlines on a list you control. Related reading: transfer pricing between a US company and its Nigerian subsidiary.
Questions people ask
Does Nigeria have thin capitalisation rules?
PwC says not as such. Instead, connected-party interest is limited to 30% of EBITDA, with excess carried forward for up to five years, under the Nigeria Tax Act from 1 January 2026.
What is the withholding tax on interest paid from Nigeria to a US company?
PwC's table shows 10% for non-resident companies, and there is no US-Nigeria income tax treaty to reduce it.
Do I need a CCI for a shareholder loan into Nigeria?
Mondaq describes the CCI as the document that enables repatriation of loan interest and capital; Templars says without it you cannot access the official FX market for repatriation.
Should the loan be in dollars or naira?
A dollar loan leaves currency risk with the subsidiary; a naira loan puts Section 988 gains and losses on the US parent. Decide with your advisers on both sides.
Sources
- PwC Worldwide Tax Summaries: Nigeria, group taxation and transfer pricing (reviewed 29 May 2026) · accessed Oct 2026
- PwC Worldwide Tax Summaries: Nigeria, withholding taxes (reviewed 29 May 2026) · accessed Oct 2026
- Mondaq (Adeola Oyinlade & Co): How to repatriate capital and profits in Nigeria as a foreign investor (19 Sep 2024) · accessed Oct 2026
- Templars: Repatriation of funds and capital importation in Nigeria, FAQs (c. 2020) · accessed Oct 2026
- Mondaq (Pavestones Legal): The CBN Foreign Exchange Manual 2026 (24 Jun 2026) · accessed Oct 2026
- IRS: United States income tax treaties, A to Z (reviewed 3 Jan 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.