10% Withholding Tax on Savings Interest Sparks Outrage as Nigerians Question Timing and Enforcement

Nigerians and investors are increasingly voicing dissatisfaction over the ongoing implementation of a 10 per cent Withholding Tax (WHT) on interest earned from savings and short-term investment instruments.

Over the last three days, PulseNets observed heightened activity on social media, especially on X, where affected customers criticised several fintech banks for commencing deductions of the 10 per cent WHT on accrued interest from savings products.

PulseNets learnt that while a section of investors believes the deductions are connected to the new tax laws that came into force on January 1, 2026, others insist that the policy existed long before the latest fiscal reforms.

Recall that in October 2025, the Federal Inland Revenue Service (FIRS), now rebranded as the Nigeria Inland Revenue (NIR), formally directed deposit money banks and financial institutions to begin enforcing a 10 per cent WHT on interest earned from short-term investments, which had previously enjoyed exemptions aimed at boosting investor returns.

Following the commencement of the new tax regime, PulseNets reported that some banks—particularly fintech institutions—have now moved to fully implement the WHT on interest income, triggering widespread frustration among retail investors and savers.

Responding to the controversy, the Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, clarified that the WHT on interest did not originate from the new tax laws.

“Withholding tax on interest has always existed in our tax laws. I honestly don’t understand why people are attributing it to the new legislation,” Oyedele said in a telephone conversation with journalists on Monday.

Offering further insight, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, emphasised the urgent need for sustained public enlightenment to address the confusion surrounding Nigeria’s evolving tax framework.

“What is happening now is a combination of verification and increased compliance under the new tax dispensation. Some provisions have always been there, but compliance was weak,” Yusuf explained.

He added, “Once enforcement improves, it gives the impression that a new law has been introduced, even when it is not. That is why many Nigerians feel this tax is new.”

According to him, inconsistencies in official communication have further worsened public perception.

“You sometimes hear different messages from tax authorities, state governments, and reform committees. These contradictions deepen confusion and frustration. What we need urgently is clarity, alignment, and better communication,” he told PulseNets.

Also speaking on the matter, a Professor of Accounting and Finance at Lead City University, Godwin Oyedokun, described the timing of the enforcement as poorly aligned with Nigeria’s current economic realities.

“The frustration Nigerians are expressing over the 10 per cent WHT on savings interest is understandable, even though the tax itself is not new,” Oyedokun said.

He explained that under Nigeria’s tax laws, interest earned on deposits has always been classified as taxable investment income, with WHT serving as the collection mechanism.

“For most individuals, this tax is treated as final. Financial institutions, including fintech platforms that operate like banks, are legally obligated to deduct and remit it,” he noted.

However, Oyedokun stressed that the real issue lies beyond legality.

“Savings interest rates in Nigeria are already extremely low and far below inflation. Most savers are losing money in real terms. When you now deduct 10 per cent from these minimal returns, people feel punished for merely trying to protect their money, not for building wealth,” he explained.

He warned that the policy could have unintended economic consequences.

“This approach risks discouraging savings within the formal financial system at a time when Nigeria desperately needs stronger financial inclusion and higher domestic savings,” he said.

According to him, small savers—many of whom were attracted through fintech platforms—may resort to informal cash holding, undermining transparency and financial sector growth.

Oyedokun also pointed to broader macroeconomic pressures as a key driver of public anger.

“High inflation, rising living costs, energy price shocks, and currency instability have already stretched households. In this environment, even lawful deductions feel insensitive,” he stated.

Also Read: Withholding Tax: FG Halts Tax Reform Implementation as Uncertainty Trails Official Gazette of New Tax Laws

He criticised gaps in policy design and public communication, noting the absence of exemption thresholds for low-income savers and the lack of a graduated structure distinguishing small depositors from large investors.

“A more balanced approach would involve exempting small interest earnings, applying differentiated treatment for larger investors, and significantly improving public communication,” he advised.

He concluded, “While the WHT on savings interest may be legally defensible, its current implementation risks weakening savings culture, financial inclusion, and public confidence at a time when economic resilience is already fragile.”