US Tax on Nigerian Stocks: Dividends, Gains, FBAR and PFIC Rules

US citizens, green card holders and other US tax residents are taxed on their worldwide income, so dividends and gains from Nigerian shares go on the US return wherever you live. There is no income tax treaty between the United States and Nigeria. Nigerian dividends are therefore usually taxed as ordinary income, with a foreign tax credit available for the 10% Nigerian tax, and the shares and accounts may also need to be reported on the FBAR and Form 8938.

For an overview covering several countries, see Tax on Nigerian Investments for Diaspora Investors. For the Nigerian rules in more detail, see Withholding Tax on Dividends in Nigeria and Capital Gains Tax on Nigerian Shares.

The Nigerian Tax Taken at Source

Nigeria deducts 10% from each dividend before it is paid. Under the Nigeria Tax Act 2025, in force from 1 January 2026, no further Nigerian tax is charged on a dividend received by a non-resident beyond that deduction. Because the IRS lists no income tax treaty with Nigeria, no treaty rate applies to reduce it.

Are Nigerian Dividends Qualified Dividends?

Usually not. Qualified dividends are taxed at the lower capital gains rates, but only if they are paid by a US corporation or a qualified foreign corporation. IRS Publication 550 treats a foreign corporation as qualified if it:

• is incorporated in a US territory; or
• is eligible for the benefits of a comprehensive US income tax treaty on the Treasury's approved list; or
• has the shares, or American depositary receipts for them, listed on a US national securities exchange or Nasdaq.

A company incorporated in Nigeria and listed only on the Nigerian Exchange meets none of these, so its dividends are generally ordinary dividends taxed at your ordinary income rates. The exception would be a company whose shares or depositary receipts are listed on a US exchange; check that with an adviser. A company that is a PFIC, described below, never pays qualified dividends. The 3.8% Net Investment Income Tax can also apply to dividends and gains once modified adjusted gross income exceeds $200,000 for a single filer or $250,000 for a joint return.

The Foreign Tax Credit for Nigerian Tax

You report the gross dividend, before the Nigerian 10% was taken off. The Nigerian tax can then be claimed either as a foreign tax credit, which reduces your US tax, or as an itemised deduction. The choice is made each year. The credit is normally claimed on Form 1116, where dividends fall in the passive category.

• The credit cannot exceed the US tax on your foreign-source income, worked out by a fraction of your total US tax.
• Unused foreign tax can generally be carried back one year and forward ten.
• You can skip Form 1116 if all your foreign income is passive, your creditable foreign taxes are no more than $300 ($600 on a joint return), and the income and tax were reported to you on a qualified payee statement as the IRS instructions define it, such as Form 1099-DIV. Under that election, unused tax cannot be carried to other years.
• Only tax you actually owed counts.

Capital Gains When You Sell

A gain on shares held for more than one year is long-term; one year or less is short-term and taxed as ordinary income. For 2026, long-term gains are taxed at:

• 0% where taxable income is up to $49,450 (single) or $98,900 (married filing jointly);
• 15% above that, up to $545,500 (single) or $613,700 (married filing jointly);
• 20% above those amounts.

Nigeria may also have a claim on a gain. The Nigeria Tax Act 2025 charges non-residents on gains relating to assets located in Nigeria and treats shares in a Nigerian company as located there. It exempts an individual's gains on Nigerian company shares where proceeds are below ₦150 million and gains do not exceed ₦10 million in any 12 consecutive months, and proceeds reinvested in Nigerian company shares within the same year of assessment. How these rules are applied to non-resident individuals holding listed shares is not yet clear from published guidance, and whether any Nigerian tax on a gain can be credited in the US is a separate question for a US adviser. Capital Gains Tax on Nigerian Shares covers the Nigerian rules.

Converting Naira to Dollars

The IRS has no official exchange rate. Its guidance is to use the rate prevailing when you receive, pay or accrue the item, and it points to rates from banks and US embassies and publishes yearly average rates. In practice, a dividend is converted at the rate on the day it is paid, the cost of shares at the rate on the purchase date, and sale proceeds at the rate on the sale date. Because the cost and proceeds are converted on different dates, a fall in the naira can turn a naira gain into a dollar loss. Keep the registrar's dividend advices and every contract note.

FBAR and Form 8938

These are reporting forms, not taxes, and each carries its own penalties for failing to file.

• FBAR (FinCEN Form 114): required if the combined value of your foreign financial accounts exceeds $10,000 at any time in the calendar year. Securities and brokerage accounts count, as do bank accounts, such as a Nigerian account that receives dividends. It is filed online through FinCEN's BSA E-Filing System, not with your tax return, by 15 April, with an automatic extension to 15 October.
• Form 8938: filed with your tax return if your specified foreign financial assets exceed the threshold. Living in the US, that is more than $50,000 on the last day of the year or $75,000 at any time for a single filer, and $100,000 or $150,000 for a joint return. Living abroad, it is $200,000 or $300,000 single, and $400,000 or $600,000 joint.
• Foreign shares held directly, outside a financial account, are reportable on Form 8938 but not on the FBAR. Many people need to file both.

PFICs: Funds Versus Ordinary Shares

A passive foreign investment company (PFIC) is a foreign corporation where 75% or more of its gross income is passive, or at least 50% of its assets on average produce passive income. The tests are applied to each company every year.

Nigerian mutual funds, exchange-traded funds and other collective investment schemes exist to hold investments, so they will usually meet one of these tests. A PFIC holding brings Form 8621 and special rules that can tax gains and larger distributions at ordinary rates with an interest charge, unless an election is made. There is a filing exception for small holdings worth $25,000 or less ($50,000 joint) where there are no taxable distributions or gains that year.

Shares in a company that runs an active business, such as a manufacturer, telecoms operator or bank, are usually not PFIC shares, because most of the income and assets are not passive. That is the usual position, not a rule. Holding companies and companies with large cash or investment balances need checking, and an adviser can look at the company's own figures.

Frequently Asked Questions

Is there a US-Nigeria tax treaty?

No. Nigeria is not on the IRS list of countries with a US income tax treaty. Nigeria's 10% dividend tax applies in full, and you rely on the US foreign tax credit rather than treaty relief.

Are Nigerian dividends taxed at the 15% qualified rate?

Generally not. Without a qualifying treaty or a US listing, a Nigerian company is not a qualified foreign corporation, so its dividends are ordinary dividends taxed at ordinary income rates.

Do I need an FBAR for a Nigerian brokerage account?

If the combined value of all your foreign financial accounts, including Nigerian bank and brokerage accounts, exceeds $10,000 at any time in the year, yes. Form 8938 is a separate test with higher thresholds.

Are shares in ordinary Nigerian companies PFICs?

Shares in an operating company, including a bank, are usually not PFIC shares, but the tests are applied to each company every year. Nigerian funds and ETFs usually are PFICs. Ask an adviser to confirm for any particular holding.