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By Chinwendu Obienyi
Banks in Nigeria have explained that a 10 per cent tax is now being taken from the interest people earn on foreign currency (dollar or FX) savings accounts. This comes after many customers raised questions about recent deductions from their accounts.
The rule is part of the Nigeria Tax Act 2025, which started on January 1, 2026. It means any interest earned on domiciliary accounts will now be taxed, just like interest on naira savings accounts.
Several banks, including Access Bank, have issued customer notifications explaining that the tax is deducted at source at the point interest is credited.
The banks stressed that the charge is not a fee imposed by financial institutions but a statutory deduction required by the federal government.
Customers had raised questions after noticing that interest payments on their dollar, pound, and euro accounts were lower than expected. In response, banks have moved to improve communication, sending emails, SMS alerts, and in-app messages detailing how the tax works.
“A 10 per cent withholding tax now applies to interest earned on foreign currency deposits and is deducted at the time the interest is paid, effective January,1, 2026, as required by the new Nigeria Tax Act 2025. Interest on Federal and State Government Bonds remain exempt”, Access Bank clarified.
This means that if a customer who earns $100 in interest would receive $90 after the deduction. The withheld amount is subsequently remitted to the appropriate tax authorities.
Analysts say the renewed emphasis by banks reflects the need to manage customer expectations and reduce confusion, especially among retail depositors who may not be familiar with withholding tax mechanisms. While similar deductions have long applied to naira savings and fixed deposits, the extension to FX accounts has drawn more attention due to the typically lower interest rates offered on such deposits.
Importantly, the tax does not apply to all fixed-income investments. Interest earned on Federal Government and State Government bonds remains exempt, a provision authorities say is intended to sustain investor appetite for public debt instruments.
Although the tax marginally reduces returns on domiciliary accounts, it is unlikely to significantly alter savings behaviour for customers who primarily hold foreign currency as a hedge against exchange rate volatility rather than for yield.
Nevertheless, some financial advisers suggest that savers may begin to reassess their portfolio allocation, particularly those seeking higher returns. Alternatives such as Eurobonds, money market instruments, or government securities could become more attractive, depending on individual risk tolerance and investment goals.
For banks, the priority remains compliance and transparency. By reiterating the policy and its implications, banks aim to ensure that customers understand the source of the deductions and avoid misinterpreting them as hidden charges.
As implementation continues, analysts expect that awareness will improve and customer concerns will ease, especially as the tax becomes a routine feature of account statements.
For now, the message from banks is that the 10 per cent withholding tax on FX deposit interest is in force, and it is here to stay under Nigeria’s evolving tax framework.
