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The short answer
Yes. US citizens and resident aliens are taxed on worldwide income, and IRS Publication 550 says investment income from outside the US must be reported unless US law exempts it; nothing exempts Nigerian T-bills. The discount you earn (face value minus purchase price) is the income, converted to US dollars. Nigeria now deducts withholding tax on T-bill interest, which may count toward a US foreign tax credit, and the account holding the bills may need FBAR and Form 8938 reporting.
Why the answer is yes
The US taxes its citizens and residents on income from anywhere. IRS Publication 54 says "your worldwide income is generally subject to U.S. income tax", and Publication 550 adds that US citizens "must report that income on your tax return unless it is exempt by U.S. law", whether or not the foreign payer issues a Form 1099. Even US Treasury bill interest is taxable federally, Publication 550 notes. A Nigerian T-bill has no special status.
If you are not a US resident for tax purposes (for example a nonresident alien on certain visas who does not meet the substantial presence test), foreign-source interest is generally outside US tax. Residency rules are covered in reporting Nigerian income as a green card holder.
What counts as the income
A Nigerian T-bill pays no coupon. You buy at a discount and receive face value at maturity, so the discount is the return. Publication 550 deals with this under acquisition discount on short-term obligations, which sets when a cash-method individual reports it. Most individuals report the discount when the bill matures or is sold, but check the rule with a preparer if you hold bills across the year-end or sell early.
Worked example (illustrative figures)
| Step | Naira | US dollars at an example rate |
|---|---|---|
| Purchase price (paid 2 Feb) | ₦4,300,000 | $2,867 at ₦1,500/$ |
| Face value at maturity (1 Feb next year) | ₦5,000,000 | $3,226 at ₦1,550/$ |
| Discount (income in naira) | ₦700,000 | |
| Nigerian withholding at 10% | ₦70,000 | $45 at ₦1,550/$ |
The rates above are invented for the example. In this case the income figure on your return is ₦700,000 converted at the rate when received, about $452 at ₦1,550/$. The naira itself also moved against the dollar between purchase and maturity; exchange gains and losses on foreign currency have their own rules, so ask your preparer how to treat the movement. The IRS has no official exchange rate and accepts any consistently used published rate (IRS foreign currency page).
Nigerian withholding and the foreign tax credit
Nigeria now deducts withholding tax on interest from short-term securities including T-bills; Mondaq (Advocaat Law Practice) reports the rate as 10%, and KPMG's December 2025 note confirms deduction at source on the payment date. The US has no income tax treaty with Nigeria (IRS treaty list), so there is no treaty rate. The IRS foreign tax credit page says only foreign income taxes, or taxes in lieu of them, qualify, and that the credit is limited to the US tax on your foreign-source income. Withholding on interest is the kind of tax people normally claim, but confirm its treatment with a preparer.
The IRS allows individuals to skip Form 1116 only if all foreign income is passive, total foreign taxes are $300 or less ($600 joint), and the income is reported on a payee statement such as a 1099-INT. A Nigerian bank will not issue a 1099, so most T-bill holders claiming the credit will file Form 1116. Dividend-side detail is in Nigerian dividends and the foreign tax credit.
Reporting the account
- Schedule B. Required if taxable interest is over $1,500, and Part III asks about foreign accounts (IRS Schedule B instructions).
- FBAR. If your foreign accounts together exceed USD 10,000 at any time in the year.
- Form 8938. At higher thresholds that depend on where you live and filing status (IRS comparison page, Sep 2026). See T-bill income and Form 8938.
Common mistakes
- Leaving it off because Nigeria taxed it. Nigerian withholding does not remove US reporting; it may only reduce US tax through the credit.
- Using one year-end rate for everything. Income is converted at the rate for the date received, not a single annual figure, unless your preparer advises a permitted average approach.
- Reporting the face value as income. Only the discount is income; the rest is your own money coming back.
- Forgetting the accounts. A T-bill holding usually sits in a bank or custody account that counts for FBAR, separate from the income question.
What to check first
- Your US tax residency for the year.
- Purchase date, cost, face value and maturity date for each bill, from your bank's contract notes.
- The withholding tax deducted, shown on your statement.
- A consistent exchange-rate source for each date.
This is general information, not tax advice.
Questions people ask
Do I pay US tax on Nigerian treasury bills?
If you are a US citizen or resident, yes. The discount is foreign-source interest income, reported in dollars, with a possible credit for Nigerian tax.
Is T-bill interest tax-free in Nigeria?
Not any more for individuals. Withholding tax is now deducted on interest from short-term securities including T-bills; FGN bond interest remains exempt.
Can I claim the Nigerian withholding tax as a foreign tax credit?
Foreign income taxes can be credited, limited to the US tax on foreign-source income. Most people will need Form 1116, because Nigerian banks do not issue 1099s.
Which exchange rate do I use for naira income on my US return?
The IRS has no official rate; use the rate prevailing when the income was received, from a published source, consistently.
Sources
- IRS Publication 550 (2025), Investment income and expenses · accessed Oct 2026
- IRS Publication 54 (Rev. 12/2025), Tax guide for US citizens and resident aliens abroad · accessed Oct 2026
- IRS: Foreign currency and currency exchange rates (reviewed 22 May 2026) · accessed Oct 2026
- IRS: Foreign tax credit (updated 9 Jul 2026) · accessed Oct 2026
- IRS: Foreign tax credit, how to figure the credit (reviewed 9 Jul 2026) · accessed Oct 2026
- IRS: United States income tax treaties A to Z (reviewed 3 Jan 2026) · accessed Oct 2026
- Mondaq (Advocaat Law Practice): FIRS imposes 10% withholding tax on interest on short-term securities · accessed Oct 2026
- IRS: Instructions for Schedule B (Form 1040), 2025 · 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.