New Tax Laws: Access, Zenith, UBA, Others Begin Major Deductions from Savings Account Interest
- Nigerians face new 10% withholding tax on savings interest, igniting outrage among savers struggling with rising costs
- Tax experts clarify that savings interest is taxed separately, leading to misconceptions about double taxation
- Deductions from fintech apps hit harder, risking a shift towards informal saving methods amidst financial pressure
Many Nigerians opened their January bank statements to an unpleasant surprise: a fresh deduction on interest earned from their savings.
Major banks, including Access Bank, Zenith Bank and UBA, alongside fintech platforms, have begun deducting a 10 per cent Withholding Tax (WHT) on savings interest, following new tax directives from the federal government.
Source: Getty Images
The move has triggered outrage among savers already under pressure from high inflation, weak purchasing power and rising living costs. For many, the deduction feels like yet another penalty on trying to save responsibly.
“They now remove withholding tax from interest on savings? How does this make sense?” one X user, @hairplug, wrote. “If salary has been taxed already, why still tax what I’m saving?”
Another user, Adeniyi Joseph, complained that PiggyVest deducted N28,700 from his account as tax, questioning why returns on investment should be taxed at all.
Why banks are making withholding tax deductions
The deductions stem from a directive issued on October 29 by the Nigeria Revenue Service (NRS), formerly the Federal Inland Revenue Service (FIRS).
The agency instructed banks and financial institutions to deduct withholding tax from all interest payments on short-term investment and savings instruments.
According to the directive, the tax must be deducted at the point of payment and applies to interest payable to individuals and other non-corporate entities.
President Bola Tinubu later confirmed on December 30 that implementation of the new tax reform laws would proceed as scheduled from January 1, 2026.
The policy is part of a broader effort by the Federal Government to widen the tax net and boost non-oil revenue.
Why do digital savers feel it more?
The impact has been especially pronounced among users of digital savings platforms.
According to a BusinessDay report, unlike traditional bank savings accounts that often yield minimal interest, fintech apps typically offer returns of 10 to 12 per cent annually.
Because the interest earned is more visible and substantial, the 10 per cent tax deduction feels sharper.
Analysts warn this could discourage formal savings, pushing some Nigerians back to holding cash, informal saving methods, or even dollarisation.
What the withholding tax really means
Tax advisory firm Forvis Mazars explains that withholding tax is not an additional tax but an advance payment of income tax on specific transactions.
The responsibility to deduct it lies with the payer, not the recipient.
When interest, dividends, rent or certain service fees are paid, the institution making the payment must deduct a prescribed percentage and remit it to the tax authority.
“Withholding tax is deducted before the recipient files their normal tax returns,” said Marvis Oduogu, tax partner at Stren & Blan. “It is not designed as a refund or payback to individuals.”
Is this double taxation?
A major source of anger is the belief that savings interest should not be taxed since the original funds came from already-taxed salaries. Tax experts say this is a misunderstanding.
Interest income is treated as a separate stream of income under Nigerian tax law. Salaries are taxed under Pay-As-You-Earn (PAYE), while interest earned from savings or investments is taxed independently.
“For individuals, withholding tax on savings interest is treated as franked investment income.
“The tax withheld is final and cannot be offset against PAYE because they are different categories of income,” said Peter Nwofia, tax partner at Forvis Mazars.
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Experts also fault financial institutions for advertising headline interest rates without clearly explaining the impact of withholding tax, leaving many savers blindsided when deductions appear.
As the new tax regime settles in, transparency and clearer communication may be the difference between sustaining trust in formal savings and driving Nigerians away from it.
CBN releases new interest rates on savings
Legit.ng earlier reported that the Central Bank of Nigeria (CBN) released the latest data on savings deposit interest rates offered by Nigerian banks, showing that most lenders are paying customers rates around 8% per annum.
The latest figures were published on January 9, 2026.
According to the apex bank’s average deposit rates data, several tier-one and mid-sized banks including Access Bank, Guaranty Trust Bank, Zenith Bank, United Bank for Africa, Fidelity Bank and Union Bank are offering savings account interest rates of about 8.10% to customers.
Proofreading by Kola Muhammed, copy editor at Legit.ng.
Source: Legit.ng
