Nigerians kick against 10% tax on savings interest, demand clarity

Growing discontent has trailed the implementation of a 10 per cent Withholding Tax (WHT) on interest earned from savings and short-term investments, with Nigerians and investors voicing frustration over what they describe as poor communication and insensitive timing amid worsening economic conditions.

Over the past three days, disgruntled investors have flooded social media platforms, particularly X, to express outrage after several fintech banks began deducting 10 per cent WHT from interest accrued on savings and short-term investment products.

Many users said the deductions came as a shock, prompting debates over whether the move was part of the new tax laws that took effect on January 1, 2026.

While some investors believe the deductions are linked to the recently introduced tax reforms, others argue that the policy predates the new regime.

Indeed, in October 2025, the then Federal Inland Revenue Service (FIRS), now renamed the Nigeria Inland Revenue, issued a directive mandating banks to commence the collection of 10 per cent WHT on interest from short-term investments—categories that had previously enjoyed exemptions aimed at boosting returns and encouraging savings.

Following the commencement of the new tax laws, a number of banks, particularly fintech institutions, have moved to enforce the deductions more strictly, triggering widespread public frustration and renewed scrutiny of Nigeria’s tax administration.

Reacting to the controversy, the Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, clarified that the WHT on interest was not introduced under the new tax laws.

“Withholding tax on interest has always been in the law. Why is it being attributed to the new law?” he queried during a telephone interview, insisting that the policy itself was not new.

Offering further context, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said the uproar reflects deeper issues of compliance gaps and insufficient public education.

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According to him, heightened enforcement under the new tax dispensation has created the impression of a new policy where one already existed.

“What I can say is that there is continuous verification and education about this new tax regime. There are some provisions that have been there that people are not complying with, but now with this new dispensation, the compliance level has been elevated,” Yusuf explained.

“So when you have a situation where there was no compliance and now there is compliance, it will appear as if it is new legislation or a new provision.”

He added that contradictions in public pronouncements by tax authorities, state governments, and reform committees have worsened confusion, stressing the need for harmonisation and clearer messaging. “This thing requires more and increased education, enlightenment and clarification,” he said.

Also weighing in, a professor of accounting and finance at Lead City University, Prof. Godwin Oyedokun, described the timing of the enforcement as particularly insensitive, given Nigeria’s current economic hardships.

“The recent complaints by Nigerians over the 10 per cent Withholding Tax on savings interest are understandable, even though the tax itself is not new in law,” he said.

Oyedokun noted that under Nigeria’s tax framework, interest on deposits has always been classified as taxable investment income, with WHT serving as the collection mechanism and, for most individuals, a final tax.

However, he argued that the core problem lies not in legality but in economic reality. “Savings interest rates in Nigeria are already extremely low and far below inflation.

Many savers are effectively losing money in real terms. Deducting 10 per cent tax from such minimal returns makes citizens feel penalised for trying to preserve value, not generate wealth,” he said.

According to Oyedokun, the policy risks discouraging savings within the formal financial system at a time when Nigeria needs deeper financial inclusion and stronger domestic savings. He warned that small savers attracted through fintech platforms may revert to informal cash holding, undermining transparency and financial sector growth.

He also pointed to broader macroeconomic pressures—high inflation, rising living costs, energy price hikes, and currency instability—which amplify public anger over additional deductions, even when lawful.

In his view, a more balanced approach would involve exempting small interest earnings, applying differentiated tax treatment for larger investors, and improving communication to rebuild trust. “Tax policy must not only be lawful but also socially responsive,” he said.