Nigerian banks will begin deducting a 10 percent withholding tax on interest earned from foreign currency deposits on 1 January 2026, the sector has confirmed. Access Bank told customers this week that the change is being implemented in line with the Nigeria Tax Act, 2025 and will apply to eligible account balances and interest payments from the effective date.
The bank said in an email to customers that the deduction will be made at source and that all collected taxes will be remitted to the Federal Government as required by law. The memo also noted a parallel change to the Electronic Money Transfer Levy. The N50 charge, previously applied to the recipient on transfers of N10,000 or more, will be taken from the sender’s account instead.
The move follows a broader directive issued by the Nigeria Revenue Service, formerly the Federal Inland Revenue Service, which on 29 October ordered banks to deduct withholding tax from all interest payments on short-term investment securities. The agency instructed that the tax be withheld from interest payable to any person, including non-corporate entities, on the payment date.
Impact of withholding tax on foreign currency deposits
For individual savers and non-corporate investors who hold deposits in foreign currencies, the immediate effect will be a lower net return on interest-bearing accounts. The withholding tax is applied at source, meaning account holders will see the 10 percent deduction at the time interest is paid. Financial institutions have been asked to ensure the amounts are correctly calculated and duly forwarded to the authorities.
Authorities argue the measure forms part of a necessary fiscal reform intended to broaden the tax base and improve revenue collection. President Bola Tinubu said on 30 December that the implementation of the tax reform laws would commence as scheduled on 1 January 2026, adding that the reforms are designed to build a fair and competitive fiscal foundation rather than to raise taxes indiscriminately.
Market participants say the change could alter behaviour among depositors. Some foreign currency deposit holders may seek alternative instruments or shorter-term placements, while others could shift funds into currency holdings or offshore accounts, depending on relative yields and transaction costs. The policy also harmonises treatment of interest earned on short-term securities, which are already subject to withholding tax under the NRS directive.
Banks will be responsible for implementing the withholding at source and for updating customer notices and transaction systems. Access Bank’s communication to customers emphasised compliance with the new Tax Act and the obligation to remit collected taxes to the federal coffers. Regulators will monitor adherence and may issue further operational guidance to clarify treatment of different account types.
Economists caution that while the immediate fiscal impact will be an increase in government receipts from interest payments, the broader effect on savings rates and foreign currency liquidity will depend on how households and investors respond. If depositors move to non-interest-bearing holdings or reduce balances, the central bank and the government may need to consider complementary measures to support orderly market conditions.
For now, depositors should review account terms, check with their banks on exact implementation procedures, and consider tax and investment advice to assess the impact on their returns. Banks have pledged to provide details to customers and to ensure that all taxes are handled as required under the new legislation.
Key Takeaways:
- Nigerian banks will deduct a 10% withholding tax on interest earned on foreign currency deposits from 1 January 2026.
- The change follows the Nigeria Tax Act 2025 and a directive from the Nigeria Revenue Service to withhold tax on interest payments.
- Electronic Money Transfer Levy of N50 will now be charged to senders on transfers of N10,000 or more.
- The move may affect savers and short-term investors and will be remitted to the Federal Government in line with the law.
