Nigerian banks will commence the deduction of a 10 percent withholding tax on interest earned from foreign currency deposits starting January 1, 2026. This development follows the provisions of the Nigeria Tax Act, 2025, which introduces new measures aimed at strengthening the country’s tax framework and broadening revenue sources.
Under the new law, interest accrued on domiciliary and other foreign currency-denominated accounts held in Nigerian banks will be subject to the withholding tax at the point of payment. Financial institutions are required to comply fully with the directive by automatically deducting the tax and remitting it to the appropriate tax authorities.
Tax and financial analysts say the policy is designed to align Nigeria’s tax system with global best practices, while ensuring that income earned from foreign currency holdings is appropriately taxed. The measure is also expected to improve transparency and enhance government revenue without placing direct pressure on consumers.
Account holders with foreign currency deposits have been advised to review their investment strategies and seek professional guidance to understand how the new withholding tax may affect their returns. Banks, on their part, are expected to notify customers and update their systems ahead of the January 2026 implementation date.
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As the effective date approaches, stakeholders will be watching closely to see how the policy impacts foreign currency savings, capital inflows, and overall confidence in Nigeria’s banking sector.