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The short answer
Generally yes. A US citizen or resident is taxed on worldwide income, there is no US-Nigeria tax treaty to exempt a Nigerian pension, and the taxable part of a pension is ordinary income. Nigeria, meanwhile, exempts pensions paid under the Pension Reform Act, so there is usually no Nigerian tax to claim as a credit, though you may be able to recover your own after-tax contributions tax-free.
The starting point: worldwide income, no treaty
IRS Publication 54 says the worldwide income of US citizens and residents is generally subject to US income tax, wherever they live. Many countries' pensions get special treatment under a tax treaty with the US, but the IRS treaty list (reviewed January 2026) has no Nigeria entry; in Africa it lists only Egypt, Morocco, South Africa and Tunisia. So a pension from a Nigerian Retirement Savings Account (RSA), a former employer's scheme or a government pension is dealt with under ordinary US rules. See why there is no US-Nigeria treaty.
How the payments are taxed
IRS Publication 575 (2025) explains the US rules for pensions and annuities. Points that matter for a Nigerian pension:
- The taxable part of a distribution is treated as ordinary income, taxed at your normal rates, not capital gains rates.
- Publication 575 says payments under a nonqualified plan must use the General Rule to work out the tax-free part. A Nigerian scheme is not a US qualified plan, so preparers usually start from the General Rule.
- Under that rule you can exclude part of each payment as a recovery of your cost, meaning money you put in that was already taxed.
- Your cost can include employer contributions made while you worked abroad, but only if those contributions would not have been taxable in the US had they been paid to you as salary.
Publication 575 does not discuss Nigerian or other foreign plans specifically, and how much of an RSA counts as "cost" depends on your history: years you were a US taxpayer, what was taxed when, and whether contributions were deducted from pay. That is a question for a preparer who has done foreign pensions before.
The Nigerian side
The Nigeria Tax Act 2025 continues to exempt pensions and gratuities granted in line with the Pension Reform Act, and the income of PRA pension funds, according to a Premium Times summary (November 2025) and a January 2026 Mondaq review. A Nigerian pension paid from an RSA is therefore usually free of Nigerian tax. The consequence for your US return is that there is no Nigerian tax to claim as a foreign tax credit, so the US tax is the full cost. How the RSA system pays out is explained in how Nigeria's RSA pension system works.
A worked example
Example only. The exchange rate and tax rate are invented, and it assumes no cost to recover. Mrs Adebayo retired from a Lagos firm, moved to Texas to live with her daughter and became a green card holder. Her PFA pays her a programmed withdrawal of ₦250,000 a month into a Nigerian bank account.
| Item | Amount |
|---|---|
| Pension for the year | ₦3,000,000 (12 × ₦250,000) |
| In dollars at an example ₦1,500 to US$1 | US$2,000 |
| Nigerian tax | Nil (PRA pension exempt) |
| Reported on her US return | US$2,000 as pension income |
| US tax at an example 12% | US$240 |
| Foreign tax credit | None, no foreign tax paid |
If she could show that some of her contributions were made from income already taxed and count as cost, part of each payment would be excluded under the General Rule. Whether the pension is also taxed at state level depends on the state; check its own guidance.
Lump sums and the accounts themselves
A one-off payment, such as the lump sum many retirees take at the start, is treated differently from a stream of payments; see US tax on a Nigerian pension lump sum. Separately, the Nigerian bank account the pension is paid into counts toward the FBAR test once your foreign accounts exceed US$10,000 at any time in the year. Whether an RSA itself must be reported on FBAR or Form 8938 is not answered on the IRS pages we read; raise it with your preparer, and see Form 8938 and FBAR for Nigerian accounts.
What to check first
- Are you a US citizen or resident for the year? If so, the pension is reportable.
- Get your PFA statements showing contributions, growth and each payment.
- Work out, with a preparer, whether any of your contributions count as cost under the General Rule.
- Convert each payment at the rate for its date, or a consistent documented method.
- Check your state's treatment.
Questions people ask
Do I pay US tax on my Nigerian pension?
Generally yes, as a US citizen or resident. There is no US-Nigeria treaty to exempt it, and the taxable part is ordinary income.
Is my RSA pension taxed in Nigeria?
Pensions and gratuities paid in line with the Pension Reform Act are exempt under the Nigeria Tax Act 2025, according to published summaries of the Act.
Can I get credit in the US for Nigerian tax on my pension?
Only if Nigerian income tax was actually paid. For an exempt RSA pension there is usually none to credit.
Is any of my pension tax-free in the US?
Possibly the part that returns your own already-taxed contributions, worked out under the IRS General Rule for nonqualified plans.
Sources
- IRS Publication 54 (2025), Tax guide for US citizens and resident aliens abroad · accessed Oct 2026
- IRS: United States income tax treaties A to Z (reviewed 3 Jan 2026) · accessed Oct 2026
- IRS Publication 575 (2025), Pension and annuity income · accessed Oct 2026
- Premium Times via AllAfrica: what the new tax law exempts (3 Nov 2025) · accessed Oct 2026
- Mondaq (Adeola Oyinlade & Co.): Understanding personal income tax under the Nigeria Tax Act 2025 (5 Jan 2026) · accessed Oct 2026
- IRS: Report of Foreign Bank and Financial Accounts (FBAR) (reviewed 30 Jul 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.