Clarifying the Misunderstanding Around Investment Income Taxation
An analyst based in Abuja, Omowunmi Samuel, has addressed recent concerns about a supposed new tax on Nigerian citizens’ savings. According to her, the Federal Inland Revenue Service (FIRS) is not introducing a new levy but is instead enforcing an existing provision that has been in place for years.
The clarification comes in response to online claims suggesting that the government is planning to impose fresh taxes on Treasury bills, corporate bonds, and other short-term securities. Samuel emphasized that this perception stems from a misunderstanding of how investment income is taxed in Nigeria.
She explained that the withholding tax on interest income is not a new policy. Instead, it is outlined in the Companies Income Tax Act, which gives the FIRS the authority to deduct tax at source from interest earned on financial instruments. “This policy has been in place for years, so it is incorrect to claim that the government is suddenly targeting savings,” she said.
Samuel pointed out that the recent public notice issued by the FIRS was simply a reminder to financial institutions to comply with their existing obligations. She clarified that there has been no increase in taxes or introduction of a new tax by the current administration. “What is happening is the renewed enforcement of a tax that has been applicable to investment earnings since 2022,” she added.
Understanding the Difference Between Savings and Interest Income
A key point highlighted by Samuel is the distinction between personal savings and the interest generated from those savings. She noted that savings deposits themselves are not taxed, but any interest income derived from them is considered taxable earnings.
“The tax does not apply to the principal amount saved, only to the income generated,” she explained. This means that individuals who keep their money in savings accounts will not be taxed on the actual deposit, but they may be subject to taxation on the interest earned.
Samuel also mentioned that a temporary exemption on interest from short-term investments expired last year. As a result, financial institutions are now expected to resume full compliance with the tax regulations.
A Part of Broader Tax Reform Efforts
The renewed enforcement of the tax, according to Samuel, should not be viewed as a new measure. Instead, it is part of ongoing efforts to strengthen revenue collection, aligning with global practices. She linked this development to Nigeria’s broader 2025 tax reform strategy, which aims to boost non-oil revenue in light of falling crude output and rising public debt.
“Many countries automatically deduct tax on investment income to improve compliance,” she said. This approach, she argued, reflects a standard practice in many economies around the world.
Samuel emphasized that the move is not about targeting individual savers but rather ensuring that taxable investment income is properly accounted for, as it has always been.
Addressing Public Concerns and Misinformation
Samuel warned that misinformation about tax policy can lead to unnecessary public anxiety. She urged Nigerians to rely on verified guidance from official sources rather than unconfirmed reports.
“The FIRS is not targeting personal savings. What it is doing is making sure that taxable investment income is properly accounted for, just as it has always been,” she concluded.