Banking, Money and Taxes in Nigeria

Nigeria boasts a highly developed banking sector, with both local and international banks playing significant roles. If you plan to stay in Nigeria for a short time, you might find it more convenient to keep your offshore bank account and open a local one for everyday living expenses.

Money in Nigeria

Money in Nigeria revolves around its official currency, the Nigerian Naira (NGN), divided into 100 kobos. Though kobos are technically still part of the currency system, they’re rarely used in day-to-day transactions. Instead, prices are usually rounded to the nearest Naira. The following denominations are available:

• Notes: NGN 5, 10, 20, 50, 100, 200, 500, and 1,000
• Coins: NGN 2 and 1, and 50 kobos (though these are less frequently seen)

In recent years, Nigeria has seen a significant redesign of its higher denomination notes, particularly NGN 200, 500, and 1,000, to tackle corruption and counterfeiting. Remember that the Naira has been quite volatile, with its value fluctuating against foreign currencies due to recent economic reforms.

Banking in Nigeria

Banking in Nigeria is regulated by the Central Bank of Nigeria (CBN), which oversees all major banks. The banking industry includes prominent names such as Ecobank Nigeria, Access Bank, Citibank, Standard Chartered Bank, and Union Bank of Nigeria.

The country’s banking systems offer various conveniences, including mobile and internet banking, but security concerns remain a priority. Internet banking has become quite reliable, though incidents of fraud – such as phishing and advanced-fee scams – are still a concern. To keep your finances safe, always verify the legitimacy of your transactions and follow general online security best practices.

Opening a bank account

If you’re a foreigner, you can operate both foreign and local accounts in Nigeria. Many prefer to keep their foreign accounts for larger sums and use a local account for daily expenses. While maintaining a foreign account can be more straightforward, the fees can quickly add up.

Setting up a local account requires patience. Research the specific processes and documentation required by each bank, as they may vary. Popular options include domiciliary accounts, which allow you to hold foreign currencies like dollars, euros, or pounds within Nigeria. Expats typically recommend Guaranty Trust Bank (GTB), Zenith Bank, and Fidelity Bank for secure transactions and ease of moving funds in and out of the country.

ATMs and credit cards

Although not all accept foreign cards, ATMs are available at many banks. Nigeria is still transitioning from a cash-based society to a more digital economy, so cash is often necessary for smaller purchases. However, an increasing number of establishments now accept debit and credit cards.

If you’re using a credit card, be vigilant with your statements to check for any suspicious transactions. Card fraud remains a risk, so it’s a good idea to notify your bank before relocating to Nigeria and using your card. Some banks will freeze your card after just one Nigerian transaction if they haven’t been notified beforehand.

Useful links

• Central Bank of Nigeria (CBN)

Taxes in Nigeria

Your tax liability in Nigeria depends on your residency status. You’re typically considered a resident for tax purposes if you’ve spent at least 183 days in the country over a 12-month period. You’ll be taxed on your worldwide income if you qualify as a resident. Non-residents, on the other hand, are only taxed on income earned within Nigeria.

Income tax in Nigeria is charged at progressive rates, with the highest rates applying to larger incomes. The Personal Income Tax Act allows for some deductions, including charitable donations and costs related to healthcare and insurance. Changes introduced in the Finance Act 2023, though, have made taxes a bit more stringent, with the repeal of several exemptions that previously benefited expats. This includes tax exemptions on income earned in convertible currencies.

For businesses employing expats, it’s also worth noting that the newly introduced Expatriate Employment Levy may impact overall costs. Although temporarily suspended for further consultation, this levy reflects broader changes in attitudes towards tax regulations targeting expats and businesses.

Nigeria has established double taxation treaties with numerous countries and has expanded these agreements to include all ECOWAS (Economic Community of West African States) member countries. These treaties are designed to prevent double taxation on personal and corporate income, capital gains, and more. You should check whether your home country has such an agreement with Nigeria and whether you qualify for exemptions.

Given the frequent updates to Nigeria’s tax laws, especially those affecting expats, it’s advisable to consult a professional tax consultant or accountant. This ensures you remain compliant while optimising any available deductions and exemptions.

Useful links

• Federal Inland Revenue Service (FIRS)