Nigerian investors and savings account holders have voiced significant frustration after fintech banks began deducting a 10 percent Withholding Tax (WHT) on interest earnings, a move many mistakenly linked to new tax laws.
The deductions, which started within the past week, sparked widespread complaints on social media platform X. While some users attributed the change to the 2025 tax reforms, tax officials confirmed the levy predates the new legislation. The Nigeria Inland Revenue Service’s predecessor had directed banks to collect the 10 percent WHT on short-term investment interest as early as October 2025, ending a previous exemption meant to boost investor returns.
Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, clarified that the tax on interest is not a recent creation. “Withholding tax on interest has always been in the law,” he stated, addressing the public confusion.
Analysts note that the current outcry stems from enhanced compliance rather than a new law. Muda Yusuf of the Centre for the Promotion of Private Enterprise explained that elevated enforcement under the current administration is making previously overlooked provisions suddenly visible, creating a perception of novelty. He highlighted contradictory messages between state and federal authorities as a key source of public confusion, calling for coordinated education and clearer communication.
The criticism extends to the policy’s economic timing. Professor Godwin Oyedokun of Lead City University described the implementation as insensitive amid severe economic hardship, including high inflation and currency instability. He noted that Nigeria’s savings interest rates are already well below inflation, meaning real returns are negative. Deducting 10 percent from such minimal yields penalizes citizens for saving, potentially driving them toward informal cash holdings and undermining financial inclusion goals.
Oyedokun pointed to structural flaws in the policy’s design, including the absence of an exemption threshold for low-income earners and a lack of graduated rates for different investor tiers. He argued that while the tax is legally justified, its abrupt enforcement without adequate public explanation risks damaging trust in the tax system and discouraging formal savings at a time the economy needs greater domestic investment.
The controversy underscores a gap between legal compliance and public sentiment. With implementation now underway, experts stress that the government must pair enforcement with robust public education to clarify the tax’s long-standing status and address its perceived unfairness on vulnerable savers. The challenge lies in balancing revenue collection with measures that protect small depositors and sustain confidence in the formal financial sector.
