Fixed Deposit vs Treasury Bills in Nigeria: Which Pays Better After Tax?

Nigerian savers face a deceptively simple question in 2026: park money in a commercial bank fixed deposit or go directly to the Debt Management Office (DMO) for Treasury Bills? The answer turns on three variables most bank brochures quietly omit: the withholding tax (WHT) haircut, the inflation-adjusted return, and the liquidity trade-off. This guide works through each one with current figures so you can make the comparison yourself.

What Are the Current Rates for Fixed Deposits and Treasury Bills in Nigeria?

As of June 2026, 91-day Nigerian Treasury Bills (NTBs) cleared the primary market at stop rates between 18.50% and 19.20% per annum, according to DMO auction results published in May 2026. The 182-day bill settled near 19.80% and the 364-day paper came in at roughly 20.50%, reflecting the Central Bank of Nigeria's (CBN) Monetary Policy Rate (MPR) of 27.50% — a rate held steady at the May 2026 Monetary Policy Committee meeting as the apex bank continued its fight against sticky headline inflation.

Commercial bank fixed deposit rates tell a different story. The CBN's published weighted average term-deposit rate for April 2026 sat at approximately 15.20% per annum for tenors of 90 to 180 days. Individual banks vary: a few tier-one lenders are offering 16% to 17% for deposits above ₦10 million locked for 12 months, while mid-tier and digital banks have been quoting as high as 18% to attract retail liquidity. Still, even the most aggressive bank offer falls below the equivalent Treasury Bill stop rate for the same tenor.

The gap is not accidental. Banks borrow cheaply from depositors and lend dearly: the average prime lending rate stood at 31.40% in April 2026 per CBN data. Fixed deposit rates are set to protect net interest margins, not to reflect the risk-free rate in the economy.

How Does Withholding Tax Affect Your Real Return?

This is where the comparison sharpens considerably. Under the Finance Act as administered by the Federal Inland Revenue Service (FIRS), both fixed deposit interest and Treasury Bill discount income attract a 10% withholding tax. The deduction is at source and final — meaning it is not refundable against PAYE or company income tax assessments for most retail investors.

The maths is straightforward. A ₦5,000,000 fixed deposit at 16% per annum for 12 months generates ₦800,000 gross interest. WHT at 10% removes ₦80,000, leaving ₦720,000 net. The post-tax yield: 14.40%.

Apply the same logic to a 364-day Treasury Bill at 20.50%. The discount income on ₦5,000,000 face value is approximately ₦1,025,000 gross. After 10% WHT (₦102,500), the net return is ₦922,500, or an effective post-tax yield of 18.45%.

The Treasury Bill advantage after tax: roughly 4 percentage points on like-for-like one-year money. For a saver with ₦10 million deployed, that difference is ₦400,000 in additional net income over 12 months.

Yet the spread alone does not settle the question. Consider purchasing mechanics. Treasury Bills are sold at a discount to face value: you pay less than the face amount up front and receive the full face value at maturity. A ₦5,000,000 face-value 364-day bill at a 20.50% discount rate costs approximately ₦4,146,341 at issuance. That is real cash leaving your account on day one. Fixed deposits, by contrast, accept your full principal and return principal plus interest at maturity. For savers who cannot comfortably allocate that lump sum at a discount, the fixed deposit entry point is more intuitive.

What Beats Inflation: Fixed Deposit or T-Bills?

The National Bureau of Statistics (NBS) headline inflation figure for June 2026 came in at 15.91% year-on-year on the rebased index, down from the 33%-plus peaks of late 2024. Food inflation stood at 17.52% and was still accelerating month-on-month.

Against those benchmarks, the real (inflation-adjusted) return on each instrument in mid-2026 looks as follows:

| Instrument | Post-tax yield | June 2026 CPI (YoY) | Real return | |---|---|---|---| | FD (best bank, 12 months) | 14.40% | 15.91% | -1.51% | | NTB 364-day | 18.45% | 15.91% | +2.54% |

The picture has finally split. A 364-day Treasury Bill now delivers a positive real return against headline inflation, a first since the tightening cycle began, while standard retail fixed deposit rates still fall just short. Negotiated fixed deposit rates above 16% close the gap. Savers who understand this context are better positioned to decide how much naira to hold at these yields, in which instrument, and what belongs in other asset classes.

This is not a new problem. The CBN's history of rate cycles shows that real deposit rates in Nigeria turned negative during the 2015-2016 oil downturn and again during the COVID-era easing cycle of 2020-2021. That long stretch of negative real rates has only just ended, and only for savers who actually move their money: a current account paying nothing still loses the full inflation rate every year, and the structural contributors to Nigerian inflation (fuel subsidy removal, the naira float, electricity tariff adjustments) have not gone away.

Liquidity, Risk, and Practical Access

Fixed deposits in Nigerian commercial banks are covered by the Nigeria Deposit Insurance Corporation (NDIC) up to ₦5,000,000 per depositor per bank under the revised coverage limit that took effect following the NDIC Act 2023. Treasury Bills carry the full sovereign guarantee of the Federal Government of Nigeria: barring a sovereign default, you receive your discount and face value at maturity. For practical purposes, both are among the safest naira-denominated instruments available.

Liquidity differs, however. Early encashment of a fixed deposit typically incurs a penalty: most banks apply a reduced rate equivalent to 50% to 75% of the contracted rate for the period actually held. Treasury Bills can be sold in the secondary market through a licensed dealer, though spreads widen and transaction costs apply outside primary market windows. For a six-to-twelve month horizon with no expectation of needing the funds early, the liquidity profiles are comparable.

Access to NTBs has broadened since the CBN and DMO introduced retail participation through commercial banks and licensed dealers. Investors can now participate in primary auctions with minimums as low as ₦50,000, and the process has moved largely online through bank treasury desks and a small number of authorised dealing members of NGX. The DMO publishes auction calendars on its website; auctions typically run fortnightly for each tenor.

For savers with larger amounts — ₦50 million and above — the Federal Government of Nigeria (FGN) bond market offers longer dated instruments at yields that have hovered between 19% and 21% for the 5-year to 10-year tenors in May 2026, with the same 10% WHT treatment. Bonds add duration risk but can lock in today's elevated yields for longer.

The decision between a fixed deposit and Treasury Bills is not about which product is inherently superior. It is about your tax position, the minimum amount you can deploy, your tolerance for the administrative steps of DMO participation, and your honest view on where the CBN policy rate is heading over your chosen horizon. In mid-2026, the data favours Treasury Bills for savers who can access them. For those who cannot, a high-rate bank fixed deposit remains a reasonable, NDIC-insured alternative — as long as you enter with clear eyes about the real return.

For a broader look at how fixed deposit rates have moved this year, see our full guide to fixed deposit rates in Nigeria for 2026.

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Regulatory note: Withholding tax on investment income is governed by the Finance Act and administered by the Federal Inland Revenue Service (FIRS). Treasury Bill auctions are conducted by the Debt Management Office (DMO) under the authority of the CBN. NDIC deposit protection limits are set under the NDIC Act 2023. The Cowrie is an independent editorial publication. We hold no financial services licence issued by the CBN, the Securities and Exchange Commission (SEC Nigeria), or any other Nigerian regulatory authority. Nothing in this article constitutes financial advice. Readers should consult a licensed financial adviser before making investment decisions.