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The short answer
A US citizen or resident reports the gross Nigerian dividend, before Nigerian withholding, as income in dollars, and can usually claim the Nigerian tax withheld as a foreign tax credit, normally on Form 1116. The credit cannot exceed the US tax on your foreign-source income, and unused credit can be carried back one year and forward ten. Because the US has no tax treaty with Nigeria, there is no reduced treaty rate; the Nigerian withholding on dividends to individuals is 10% under the 2024 regulations.
How the withholding works
When a Nigerian company pays a dividend, its registrar deducts withholding tax and pays you the rest. PwC's summary of the Deduction of Tax at Source (Withholding) Regulations 2024 shows a 10% rate on dividends for individuals, resident and non-resident. Your dividend advice from the registrar shows the gross dividend, the tax deducted and the net paid. Keep every advice: it is your evidence for the credit.
The US has no income tax treaty with Nigeria (IRS treaty list, January 2026), so no treaty caps the Nigerian rate and no treaty article decides which country taxes first. US domestic rules do the work.
Reporting the dividend
- Use the gross amount. Report the dividend before Nigerian tax, not the net that reached your account; the withheld tax is what you claim as a credit.
- Convert to dollars. Use the exchange rate for the date of payment from a consistent published source; the IRS has no official rate (IRS foreign currency page).
- Schedule B. Over $1,500 of ordinary dividends means listing them on Schedule B (IRS Topic 404), which also asks about foreign accounts.
- Ordinary or qualified? Publication 550 sets "qualified foreign corporation" tests for lower rates. Without a treaty, a Nigerian company's dividend generally needs another route to qualify, so many preparers treat it as ordinary. Check your own case.
Claiming the foreign tax credit
The IRS says you can take foreign income taxes as a credit (Form 1116) or as an itemised deduction, and that generally only income, war profits and excess profits taxes, or taxes in lieu of them, qualify. A withholding tax on dividends is a tax on income, which is why it is normally creditable. The credit is usually worth more than the deduction, because it reduces tax dollar for dollar.
The limit
The IRS limits the credit to your US tax multiplied by the share of your taxable income that is foreign-source. In plain terms, Nigerian tax can only offset the US tax on foreign income, not on your US salary. Dividends fall in the passive category, so they are calculated in that basket.
When you can skip Form 1116
The IRS lets individuals claim the credit without Form 1116 only if all foreign income is passive, total foreign taxes are $300 or less ($600 on a joint return), and the income and tax are reported on a payee statement such as a 1099-DIV. A Nigerian registrar does not issue a 1099-DIV, so most people holding Nigerian shares directly will need the form. If you hold Nigerian shares through a US broker that issues a 1099-DIV, the exception may apply.
Worked example (illustrative figures)
| Step | Amount |
|---|---|
| Gross dividend | ₦1,000,000 |
| Nigerian withholding at 10% | ₦100,000 |
| Net received | ₦900,000 |
| Gross in dollars at an example ₦1,500/$ | $666.67 |
| Nigerian tax in dollars | $66.67 |
| US tax on the dividend at an example 22% | $146.67 |
| Less foreign tax credit | $66.67 |
| Net US tax on the dividend | $80.00 |
The arithmetic: ₦1,000,000 ÷ 1,500 = $666.67; 22% of that is $146.67; minus the $66.67 credit leaves $80.00. The exchange rate and tax rate are invented for the example, and the real limit depends on your whole return.
Mistakes that cost the credit
- Reporting the net dividend. If you report only what reached your account and claim no credit, you are taxed on less income but lose the credit, and the return is wrong either way.
- No documents. Without the registrar's dividend advice showing the tax deducted, you have little to show the IRS if asked.
- Claiming more than was withheld. The IRS notes that the amount withheld is not necessarily the amount that qualifies for the credit, so claim only the qualifying Nigerian income tax.
- Mixing up funds and shares. Distributions from a Nigerian mutual fund may fall under PFIC rules instead; see is a Nigerian mutual fund a PFIC.
Carryovers and records
If the limit stops you using all the Nigerian tax in a year, the IRS allows the unused amount to be carried back one year and forward ten. Credits claimed under the no-Form-1116 election cannot be carried over. Keep the registrar's dividend advices, your CSCS statements and your exchange-rate source with your return. Opening the accounts is covered in investing in NGX stocks while living in the US, and interest income in Nigerian T-bill interest and US tax.
This is general information, not tax advice; a preparer familiar with Nigerian income can apply it to your return (see claiming credit for tax paid in Nigeria).
Questions people ask
Do I report the gross or net Nigerian dividend to the IRS?
The gross dividend, before Nigerian withholding. The tax withheld is then claimed as a foreign tax credit or deduction.
Is there a US-Nigeria tax treaty for dividends?
No. The IRS treaty list does not include Nigeria, so no treaty rate applies.
Do I need Form 1116 for Nigerian dividends?
Usually yes, because the no-1116 exception requires the income to be on a payee statement such as a 1099-DIV, which Nigerian registrars do not issue.
Are Nigerian dividends qualified dividends?
It depends on the qualified foreign corporation tests in IRS Publication 550. Without a treaty, many are treated as ordinary; check your case.
Sources
- PwC Nigeria: Highlights of the Deduction of Tax at Source (Withholding) Regulations 2024 · accessed Oct 2026
- IRS: United States income tax treaties A to Z (reviewed 3 Jan 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 Topic no. 404, Dividends (reviewed 8 Oct 2026) · accessed Oct 2026
- IRS Publication 550 (2025), Investment income and expenses · accessed Oct 2026
- IRS: Foreign currency and currency exchange rates (reviewed 22 May 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.