Nigeria has entered a decisive new phase in tax administration. The Nigeria Revenue Service NRS has issued a public notice outlining the phased implementation of its E-Invoicing and Electronic Fiscal System (EFS), with the programme already underway for large taxpayers and scheduled to expand to medium and emerging taxpayers over the coming years.

Also known as the Merchant Buyer Solution (MBS), the initiative fundamentally changes how businesses generate, transmit, authenticate, and store invoice data. With large taxpayers already onboarded and enforcement timelines now clearly mapped out, Nigerian enterprises must begin preparing for a fully digital fiscal environment

A New Era of Digital Tax Compliance

Electronic invoicing replaces paper-based billing with structured digital exchange of invoices, credit notes, and debit notes between buyers and sellers through integrated systems. By digitizing invoicing and enabling secure transmission through accredited platforms, the reform is expected to reduce tax leakages and underreporting, improve audit efficiency and revenue assurance, strengthen transparency across supply chains and simplify compliance through automation and interoperability.

For businesses, this marks a clear shift toward technology driven compliance, where invoicing, reconciliation, reporting, and authentication become part of a unified digital workflow.

How Nigeria’s E Invoicing Rollout Evolved

Nigeria’s move toward electronic fiscalisation has unfolded gradually as part of a broader digital tax transformation agenda:

• 2021- Authorities signaled plans to connect automated tax systems to taxpayers’ electronic records, laying early groundwork for digital monitoring.
• 2024- Mandatory e invoicing policy direction emerged through the Merchant Buyer Solution framework.
• January 2025- Pilot deployment began with selected large taxpayers to validate integrations and data transmission.
• August 2025- Official go live for large taxpayers marked the transition from preparation to live fiscal reporting.
• 2026 to 2028- Phased nationwide expansion covering go-live and enforcement for medium (2027) and emerging (2028) taxpayers.

This consultation pilot, which aims to stabilise and enforce pathways, reflects international best practices for national fiscalisation programs.

Read more: Navigating the Future of Tax Compliance: FIRS to Roll Out E-Invoicing in Nigeria

The Legality: What Gives NRS the Authority

A major question business often ask is what makes this mandatory.

According to the NRS public notice on the EFS rollout, the programme is anchored in Nigeria’s tax administration legal framework. Section 23 of the Nigeria Tax Administration Act (NTAA) empowers the Service to deploy technology for efficient tax administration and collection, while Section 158 of the Nigeria Tax Act (NTA) mandates taxpayers to implement the fiscalisation system deployed by the Service.

Taken together, these provisions establish the basis for NRS to introduce and enforce a digital fiscal regime across taxpayer categories, particularly where compliance depends on structured invoice data and electronic reporting.

Separately, Nigeria’s technical and ecosystem governance is supported by the National Regulatory Guideline for Electronic Invoicing in Nigeria 2025 issued by NITDA, which

• Applies to regulators, accredited service providers, and all entities generating or processing electronic invoices.
• Defines the operational roles of Access Point Providers and System Integrators.
• Establishes compliance, licensing, monitoring, and enforcement structures within the e-invoicing ecosystem.

These elements collectively confirm that E Invoicing under EFS is a statutory compliance requirement and not optional modernization.

Phased Rollout Timeline

To ensure operational readiness, NRS is implementing EFS in structured phases aligned with turnover thresholds.

Large Taxpayers Above ₦5 Billion

• Go live: August 2025.
• Post goes live review: January to March 2026.
• Compliance enforcement: April to June 2026.

Large enterprises are already transmitting invoice data and setting the pace for national adoption.

Medium Taxpayers ₦1 Billion to ₦5 Billion

• Stakeholder engagement: January to March 2026.
• Pilot rollout: April to June 2026.
• Go live: 1 July 2026.
• Compliance enforcement: January to March 2027.

Preparation timelines for this segment are now time critical.

Emerging Taxpayers Below ₦1 Billion

• Stakeholder engagement: January to March 2027.
• Pilot rollout: April to June 2027.
• Go live: 1 July 2027.
• Compliance enforcement: January to March 2028.

Although timelines are longer, early readiness significantly reduces disruption risk.

What This Means for Businesses

The nationwide mandate represents more than regulation. It is a structural digital transformation of commercial operations. Businesses must prepare to generate invoices in standardised compliant digital formats, transmit data securely via accredited e invoicing access platforms, maintain audit-ready electronic transaction records, and meet ongoing monitoring, reporting, and compliance obligations.

Failure to prepare before enforcement windows may expose organisations to penalties, service disruption, or regulatory action, while early readiness enables faster reporting, reduced errors, improved visibility, and stronger credibility.

The Critical Role of Technology Integration

Compliance is now deeply technology dependent; successful adoption relies on qualified system integrators and secure digital infrastructure operating within Nigeria’s regulated E-invoicing framework.

To support businesses through this transition, Stransact’s technology arm, Doftwerks, has been approved to assist organisations with integration, compliance-ready invoicing workflows, and secure connectivity to the national e invoicing ecosystem.

Through Doftwerks, businesses can:

• Integrate ERP, POS, and accounting systems with compliant e invoicing infrastructure.
• Implement secure authentication, transmission, and audit trail capabilities.
• Accelerate readiness ahead of enforcement timelines.
• Minimise operational disruption during migration to electronic fiscal reporting.

This capability complements Stransact’s broader mission of enabling seamless, compliant, and future-ready financial operations for Nigerian enterprises.

Read more: FIRS E-Invoice Service

Preparing for the Future Now

One conclusion is unavoidable: Electronic invoicing is becoming the default framework for doing business in Nigeria. Organisations that digitise workflows, align with compliant infrastructure, and begin integration early will transition confidently. Those that delay risk last minute disruption as enforcement deadlines approach.

Conclusion

Nigeria’s E-Invoicing rollout marks a decisive step toward a transparent, efficient, and digitally governed tax system. Backed by statutory authority, national technical standards, and phased enforcement, the reform signals a permanent shift in how businesses document and report transactions.

For forward thinking organisations, this is more than compliance. It is an opportunity to modernise finance operations, strengthen governance, and compete in a digital economy.

Through Stransact and its approved technology arm, Doftwerks, Nigerian businesses can navigate this transition with confidence, securely, compliantly, and efficiently.

Introduction: Reform Raises Old Legal Questions

The Nigeria Revenue Service (NRS) has issued formal notices to taxpayers announcing the commencement of the Nigeria Tax Act, 2025 (NTA) and the Nigeria Tax Administration Act, 2025 (NTAA), with effect from 1 January 2026. The notice, intended to provide “clarifications for ease of compliance and transition”, instead raises fundamental legal questions about the temporal application of tax laws, the scope of administrative authority, and the continued relevance of settled judicial principles.

At the heart of the controversy is whether the NRS can, through administrative guidance, apply a new tax regime to income and transactions that arose before the commencement of the legislation.

Year of Assessment Versus Year of Income

The notice states unequivocally that “income tax returns due for filing in the 2026 Year of Assessment shall be prepared, filed, and assessed in accordance with the provisions of the NTA and NTAA.” On its face, this appears administratively tidy. In law, however, it is far from straightforward.

For upstream petroleum companies, the year of assessment coincides with the year of income (i.e. actual year basis of assessment). For all other companies, Nigeria operates a preceding-year basis of assessment. Consequently, income reported in the 2026 Year of Assessment for non-upstream companies relates to profits earned in the 2025 financial year, at a time when the NTA and NTAA were not in force.

Requiring taxpayers to compute 2025 income under a legal regime that only commenced on 1 January 2026 amounts, in substance, to retroactive taxation.

The Presumption Against Retroactivity in Tax Law

Nigerian courts have long held that statutes are presumed to operate prospectively unless the legislature clearly provides otherwise. This presumption is particularly strong in tax law, where statutes impose compulsory financial burdens. In Uwaifo v. Attorney-General, Bendel State and Attorney-General of the Federation v. Abubakar, the Supreme Court cautioned against interpretations that retrospectively alter substantive rights or liabilities.

Nothing in the NTA or NTAA expressly authorizes the retrospective application of income tax provisions to profits earned before their commencement. In the absence of such language, administrative notices cannot lawfully supply what the legislature has withheld.

The Accugas Case: A Direct Judicial Answer

This issue is not novel. In Accugas Limited v. Federal Inland Revenue Service, the Tax Appeal Tribunal was confronted with an argument strikingly similar to the one now implicit in the NRS notice. The tax authority contended that because an amended tax law (Finance Act, 2019) was in force in the relevant Year of Assessment, it should apply to income earned in an earlier accounting period.

The Tribunal rejected that argument in clear terms. It held that for companies assessed on a preceding-year basis, tax liability is governed by the law in force during the year the income was earned, not the year in which the assessment is made. The Year of Assessment, the Tribunal explained, is an administrative construct; it cannot be used as a legal mechanism to impose new tax rules on prior-year income.

On appeal, the Federal High Court affirmed this reasoning, giving it binding judicial weight. The lesson from the Accugas case is unmistakable: the timing of assessment cannot override the timing of income.

Against this backdrop, the directive that 2026 YOA returns must be assessed under the NTA and NTAA “irrespective of the actual filing date” sits on legally fragile ground for non-upstream taxpayers.

Read more: The Limits of Regulatory Authority and the Imperative of Legislative Clarity

Transactional Taxes: A Selective Temporal Approach

The NRS notice adopts a different approach for transactional taxes. It states that the provisions of the NTA and NTAA shall apply to VAT, Stamp Duties and Withholding Tax “in respect of transactions occurring on or after 1 January 2026”. This is orthodox and uncontroversial. Transactional taxes attach to discrete events, and the applicable law is the law in force at the time the transaction occurs.

The notice further preserves the validity of all VAT actions lawfully undertaken before 31 December 2025, including filings, assessments, payments and credits. This saving provision implicitly recognizes that the new law cannot disturb completed transactions.

The difficulty arises when this logic is not consistently applied across the tax system.

Capital Gains: An Important but Telling Concession

The notice expressly provides that chargeable gains arising from disposals between 1 January 2025 and 31 December 2025 “shall be assessed and filed in accordance with the provisions of the repealed Capital Gains Tax Act”. Only disposals occurring on or after 1 January 2026 are brought under the new regime.

This concession is significant. It acknowledges that capital gains crystallize at the point of disposal and must be governed by the law in force at that time. It also acknowledges, implicitly, that applying the new law to 2025 disposals would be impermissibly retrospective.

Yet this creates an immediate tension with the broader directive on income tax for the 2026 Year of Assessment.

Read more: One Law, Two Scripts: Navigating the Material Discrepancies in the Nigeria Tax Act 2025 – Eben Joels

Capital Gains as Income: A Structural Conflict

One of the most far-reaching reforms introduced by the NTA is the integration of capital gains into income tax computations. Under the new regime, chargeable gains from 1 January 2026 form part of total profits for income tax purposes. This reform makes the NRS’s transitional position even more delicate.

The notice states that “income tax returns due for filing in the 2026 Year of Assessment shall be prepared, filed, and assessed in accordance with the provisions of the NTA and NTAA”. For non-upstream companies, the 2026 YOA relates to 2025 income. This would, in effect, require taxpayers to apply the new law to 2025 profits (except for capital gains, which are preserved under the old law).

The result is a selective temporal application: one part of a company’s income (capital gains) is governed by the old statute, while the rest (ordinary profits, other transaction taxes) falls under the new law, all within the same assessment year. Nigerian courts, including in Accugas Ltd v. FIRS, have consistently rejected such selective retroactive application, holding that tax liability is determined by the law in force at the time income is earned, not by the year of assessment.

In short, the NRS notice recognizes the impossibility of retroactively reclassifying capital gains yet attempts to do so implicitly for all other income in the same period, creating a legal and administrative contradiction that cannot be ignored. Tax law does not support such selective temporal logic. A single transaction carried out in 2025 cannot, as a matter of principle, be partly governed by repealed legislation and partly by new legislation absent explicit statutory direction.

The Limits of Administrative Guidance

Courts have consistently held that administrative circulars and notices cannot impose tax obligations beyond what the statute authorizes. In Attorney-General of the Federation v. Nigeria LNG Limited and FBIR v. Halliburton (WA) Ltd, the courts emphasized that tax liability arises strictly by operation of law, not by administrative convenience.

The NRS notice, however well-intentioned, cannot override the statutory presumption against retroactivity or displace binding judicial authority, including the Accugas decision”.

A Safer Path Forward

A legally coherent transition would be to apply the NTA and NTAA prospectively to income and gains arising from financial years beginning on or after 1 January 2026. For non-upstream companies, this would mean that the 2026 Year of Assessment, which relates to 2025 income, remains governed by the repealed laws, with the new regime fully taking effect from the 2027 Year of Assessment. Such an approach would align administrative practice with judicial precedent, preserve taxpayer certainty, and protect the credibility of Nigeria’s ambitious tax reform agenda.

A tax system that commands respect and compliance is one that is predictable, transparent and anchored in the rule of law. Nigeria’s tax reform agenda will be best served by ensuring that these principles are not sacrificed in the rush to implementation.

Nigeria’s fiscal landscape has officially shifted with the commencement of the Nigeria Tax Act, 2025 on January 1, 2026. However, a quiet storm is brewing in the boardrooms of tax consultants and corporate legal departments. Two versions of the same Act are currently in circulation: one released previously by the Federal Inland Revenue Service (FIRS) as the gazette tax laws, bearing a reference number “FGP 29/72025/5OO” and the “Final Approved Copy”; the version bearing the weight of the law, signed by both the Clerk of the National Assembly and President Bola Ahmed Tinubu, which was recently made public by the National Assembly. Incidentally, both copies claim to be published by the official gazette of the Federal government Press. While the former “FGP 29/72025/5OO” lists the page range as A385-A597, the copy released by the National Assembly bearing the stamp “Final Approved Copy” lists the page range as A387-A596.

While the differences may seem subtle at a glance, a deep dive reveals material discrepancies that could redefine tax liabilities for millions of businesses, particularly Small and Medium Enterprises (SMEs).

Perhaps the most jarring difference lies in the very definition of a “Small Company.” Under the FIRS version of the Act, a small company which enjoys a 0% Companies Income Tax (CIT) rate, is defined as a business with an annual gross turnover of N50,000,000 or less. In a significant departure, the Presidentially-signed Final Approved Copy raises this ceiling to N100,000,000. This N50 million gap is not merely semantic; it represents a vast segment of the Nigerian business community that would be exempt from income tax under the official law but potentially pursued for payment under the FIRS version.

Read more: Why Nigeria Cannot and Will Not Tax Your Bank Account – Eben Joels

Another subtle but material difference lies in the taxation of “Digital” vs. “Virtual Assets”. As Nigeria seeks to formalize its burgeoning digital economy, the terminology used to describe what is to be taxed is not so straightforward. In the FIRS version, Section 4(1)(j) explicitly brings “profits or gains from transactions in digital or virtual assets” into the tax net. The Final Approved Copy, however, opts for the more concise “digital assets”. While “digital” is often used as a catch-all, the inclusion of “virtual” in the FIRS version appears to cast a wider, more aggressive net over the crypto and blockchain space.

The list of repealed laws is the bedrock of any new tax regime. Here, the FIRS version includes a critical addition: it lists the “Taxes and Levies (Approved List for Collection) Act” as being repealed. The version released by the National Assembly and signed by the President does not include this Act in its list of repeals. This creates a legal grey area regarding which agency; Federal, State, or Local has the authority to collect specific levies. If the Taxes and Levies Act remain in force (as the President’s signature suggests), many of the collection mandates assumed by the new Act could face constitutional challenges in court.

The energy sector is not exempt from the confusion. In Section 86, which governs decommissioning and abandonment funds for petroleum operations, the FIRS version demands that licensees deposit a minimum of 30% of the fund with a Nigerian bank. The national assembly version sets the threshold at 15%.

Furthermore, the FIRS document contains an expanded Section 13 that provides detailed definitions for “financial technology” (fintech), “shared services”, and “labelled startups”. These technical definitions, intended to clarify the tax status of tech-driven services, are notably absent from the same section in the version signed into law by the President.
In the eyes of the Nigerian judiciary, the rule of thumb is clear: the version signed by the Clerk of the National Assembly and given Presidential Assent is the law of the land. The “Final Approved Copy,” which lists the Official Gazette range as A387-A596, remains the only legitimate reference for taxpayers.

Read more: The Limits of Regulatory Authority and the Imperative of Legislative Clarity

The instances mentioned above do not reflect all the material instances we have cited. For example, the scope of “employment income” appears broader in the unsigned version distributed earlier, before the recent version released by the National Assembly. There are also differences in what constitutes “Gas Production Credits”. Hidden somewhere in the previous version is a mandate for the Nigerian Upstream Petroleum Regulatory Commission to account for all royalties due within the ten years immediately preceding the Act’s commencement. This material mandate is missing from the version released by the National Assembly.

As the FIRS begins implementation, discrepancies such as referring to the “Nigeria Revenue Service” instead of the “Nigerian Revenue Service” cited in the signed copy and several other subtle differences may lead to avoidable litigation. For now, Nigerian businesses are advised to comply with the signed Gazette issued by the National Assembly.

Nigeria’s ongoing tax reform process, including the enactment of omnibus tax statutes intended to replace and consolidate several existing tax laws, represents one of the most far-reaching fiscal restructurings in recent history. Given the breadth and systemic impact of these reforms, strict adherence to constitutional procedure, legislative authority and settled principles of administrative law is indispensable. These are just not matters of form; they go to the legitimacy of the law itself.

Recent public statements attributed to the Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, suggesting that perceived defects or inconsistencies in the clear provisions of a gazetted Act may be addressed through regulations, had already raised concern within the legal and tax community. Those concerns have now assumed greater significance in light of both Mr. Oyedele’s further explanation and the emergence of an ongoing investigation by the National Assembly into post-passage alterations of the tax legislation.

Mr. Oyedele’s Clarification and the Problem It Reveals

In his most recent public explanation, Mr. Taiwo stated that he does not have access to the harmonised version of the tax legislation as passed by the National Assembly. He further indicated that this lack of access makes it difficult to ascertain whether the version currently gazetted accurately reflects what was approved by the legislature.

This clarification is legally consequential. If a key factor in the reform process is unable to independently verify the harmonized legislative text, then questions about discrepancies cannot be resolved by assumption, explanation or administrative interpretation. At that point, the issue ceases to be one of implementation detail and becomes a question of legislative authenticity.

Read more: Why Nigeria Cannot and Will Not Tax Your Bank Account – Eben Joels

Legislative Authority and the Role of the National Assembly

Under sections 4(1) and (2) of the Constitution of the Federal Republic of Nigeria 1999 (as amended), legislative power for the Federation is vested exclusively in the National Assembly. That authority is neither shared with committees nor exercisable by administrative bodies through proxy. The Supreme Court has consistently affirmed that substantive law-making power is exclusive and non-delegable.

Once a bill has been passed by the National Assembly, assented to by the President and published in the Official Gazette, the legislative process is complete. The text so gazetted constitutes the law and is the only version recognized by the Constitution. However, this constitutional finality necessarily presupposes that the gazetted text is an authentic reproduction of the harmonised bill passed by Parliament.

Gazetting, Authenticity and the Current Uncertainty

Publication in the Official Gazette is the act that confers legal force and public notice on legislation. Nigerian courts have consistently treated the Gazette as conclusive evidence of statutory law. However, the authority of the Gazette depends on authenticity. Where credible questions arise as to whether the gazetted text corresponds with the harmonised version approved by the National Assembly, that uncertainty strikes at the root of legality.

This concern is no longer speculative. The House of Representatives has formally constituted a Select Committee to investigate allegations of post-passage alterations to the tax legislation. The Committee’s interim findings suggest that certain provisions may have been inserted, modified or removed after legislative passage, raising serious constitutional questions as to validity.

In such circumstances, neither drafts, explanatory notes nor post-enactment assurances can cure the uncertainty. Only the legislature itself can conclusively determine what it passed.

Read more: How the Nigeria Tax Act 2025 Empowers Individual Taxpayers

Why Regulations Cannot Resolve Legislative Defects

It is in this context that suggestions about using regulations to “correct” perceived defects become particularly problematic. Regulations are a form of delegated or subsidiary legislation. Their validity depends entirely on the enabling Act, and Nigerian case law is settled that they cannot amend, override or contradict the clear provisions of an Act of the National Assembly.

More fundamentally, regulations cannot be used to resolve doubts about whether the primary legislation itself accurately reflects legislative intent. Delegated legislation presupposes a valid and settled principal statute. It cannot be deployed to stabilise, legitimise or repair uncertainty at the level of primary legislation.

Institutional Risk of Proceeding Amid Legislative Uncertainty

Proceeding with implementation while the National Assembly is actively investigating the legality and provenance of the gazetted Acts carries significant institutional risk. It risks creating multiple competing “versions” of the law: one allegedly passed, another gazetted, and a third administratively interpreted. In tax law, where certainty is foundational, such fragmentation is untenable.

It also exposes taxpayers, administrators and the government itself to avoidable litigation, compliance disputes and enforcement challenges. Once implementation begins, unwinding actions taken under a statute later found to be defective becomes legally and practically complex.

The Case for Deferring Implementation

In light of Mr. Oyedele’s clarification and the ongoing legislative investigation, constitutional prudence points in one direction. Implementation of the new tax legislation should be deferred until the National Assembly concludes its inquiry and either confirms the authenticity of the gazetted text or takes corrective legislative action.

Deferring implementation is not an indictment of reform. Rather, it is a safeguard for the reform. It protects taxpayers from uncertainty, preserves institutional credibility and ensures that when implementation begins, it rests on an unimpeachable legal foundation.

Conclusion

Nigeria’s tax reform agenda can only succeed if it is anchored firmly in constitutional legality. Where uncertainty exists as to whether a gazetted Act faithfully reflects what the legislature passed, that uncertainty must be resolved by the legislature, not managed by regulation or administrative explanation.

No committee, however well intentioned, can substitute regulatory assurance for legislative certainty. The supremacy of the Constitution, the primacy of the National Assembly and the authority of an authentic Official Gazette are not obstacles to reform. They are the conditions that make reform lawful, credible and enduring.

There is a pervasive fear among Nigerians often fueled by aggressive headlines that the government is on the verge of peering into your bank account and arbitrarily debiting “unpaid taxes” based on your daily transaction alerts.

The fear is understandable. The government is desperate for revenue. The recent passage of the Income Tax Act (ITA) 2025, a product of the current administration’s tax reform committee, was meant to modernize our archaic tax laws. Despite the fanfare, the new Act has failed to address the fundamental structural flaws in the old Personal Income Tax Act (PITA).

Here is the cold, hard reality: The Nigerian government cannot and will not tax your bank account directly anytime soon. Here is why.

The Wrong Taxman has the Data (Federal vs. State)

The primary safeguard preventing Nigeria from taxing your personal bank account is Nigeria’s federal structure.

Under the Nigerian constitution and retained by the ITA 2025, the Federal Government (via the FIRS or the newly proposed Nigeria Revenue Service) collects taxes from companies. The State Governments (via their State Internal Revenue Services) collect taxes from individuals.

This creates a massive disconnect. The Federal Government has the data. Through the NIBSS and BVN frameworks, the Federal Government can theoretically track money flows.  However, the Federal Government cannot legally collect Personal Income Tax (PIT) from you unless you are a police officer, military personnel, or a diplomat. For the remaining 99% of the population, that right belongs to the state where you reside.

The FIRS cannot simply hand over your banking data to 36 states because of complex data privacy and banking secrecy laws that remain largely unaddressed by the new Act. A simple fix such as enacting a nominal federal income tax (say 1%) would have significantly enabled the sharing of data between Federal and State Tax agencies. It could also be used as tool to transfer funds to the vulnerable rather than the current opaque method done via the Ministry of Humanitarian Affairs.

The 35 Weak Links (State Internal Revenue Services)

If you live in Lagos, you might have reason to be slightly worried. The Lagos State Internal Revenue Service (LIRS) is an outlier, technologically advanced and aggressive. But for the rest of the country? The system is broken.

Aside from Lagos and perhaps the FCT, most State Internal Revenue Services (SIRS) are hollow institutions. They are often headed by political appointees; friends of the Governor with zero depth in tax administration or forensic accounting.

These agencies lack the software to analyze bank statements even if they had them. They lack the political will to compel their wealthy residents to pay the right amount of tax because these wealthy individuals may very well be the sponsors of those holding the highest political positions.

The State IRS rely almost exclusively on Pay-As-You-Earn (PAYE), where companies do the work for them by deducting taxes at the source. They lack the capacity to audit the millions of personal bank accounts within their domain. They are too weak to enforce collection on individuals who do not earn a salary.

The “Secondee” Loophole

The most glaring weakness of the ITA 2025 is that it was touted as a reform to capture the wealthy, yet it arguably makes it easier for the ultra-rich to slip away.

A major flaw exists in the definition of taxable income regarding “Secondees”, expatriates or Nigerians seconded from foreign firms to work in Nigeria. The Act appears to completely exempt the income of a secondee if they can prove they are paying taxes in their “home country.”

This is a massive oversight. It means a high-earning executive earning $20,000 a month in Nigeria can avoid paying any tax to the Nigerian state by presenting a tax receipt from a low-tax jurisdiction or their home country. While the average Nigerian employee has their tax deducted at source, the high-net-worth individual with complex global income sources is given a legal exit route. If the law cannot even capture the clearly defined income of a corporate executive, it certainly lacks the sophistication to scrutinize the murky inflows of a personal savings account.

Bank Turnover ≠ Taxable Income

Finally, there is a legal hurdle that the tax authorities have not cleared. A credit alert in your bank account is not proof of income. If your spouse transfers money to you for school fees, that is not income. If you sell a used car and the buyer transfers cash, that is a return of capital, not necessarily profit. If you receive a refund for a failed transaction, that is not income.

For a tax authority to tax your bank account, it must first distinguish between revenue and income. This requires a level of forensic auditing that simply does not exist at the state level. They cannot simply apply a flat tax rate to your total credit alerts without facing lawsuits they would almost certainly lose in a working judiciary.

Conclusion

While ITA 2025 has rearranged the furniture, the house remains the same. As long as the collection of personal income tax is left to 36 disparate, under-resourced, and politically compromised State Boards, your bank account remains relatively safe.  And as long as every Nigerian does not pay personal income tax to the center, the current tax reforms from a personal income perspective are inchoate.

The taxman may bark, but until the constitution is amended to centralize personal tax collection or until the States wake up and employ technocrats rather than politicians, he has no teeth to bite your savings.

Eben Joels is the Managing Partner of Stransact Chartered Accountants, an audit, tax, and consulting firm in Nigeria. He is also a subject-matter expert in International Tax and Financial Reporting Standards and a licensed attorney.

There is a pervasive fear among Nigerians—often fueled by aggressive headlines—that the government is on the verge of peering into your bank account and arbitrarily debiting “unpaid taxes” based on your daily transaction alerts.

The fear is understandable. The government is desperate for revenue. The recent passage of the Income Tax Act (ITA) 2025, a product of the current administration’s tax reform committee, was meant to modernize our archaic tax laws. Despite the fanfare, the new Act has failed to address the fundamental structural flaws in the old Personal Income Tax Act (PITA).

Here is the cold, hard reality: The Nigerian government cannot—and will not—tax your bank account directly anytime soon. Here is why.

The Wrong Taxman has the Data (Federal vs. State)

The primary safeguard preventing Nigeria from taxing your personal bank account is Nigeria’s federal structure.

Under the Nigerian constitution and retained by the ITA 2025, the Federal Government (via the FIRS or the newly proposed Nigeria Revenue Service) collects taxes from companies. The State Governments (via their State Internal Revenue Services) collect taxes from individuals.

This creates a massive disconnect. The Federal Government has the data. Through the NIBSS and BVN frameworks, the Federal Government can theoretically track money flows.  However, the Federal Government cannot legally collect Personal Income Tax (PIT) from you unless you are a police officer, military personnel, or a diplomat. For the remaining 99% of the population, that right belongs to the state where you reside.

The FIRS cannot simply hand over your banking data to 36 states because of complex data privacy and banking secrecy laws that remain largely unaddressed by the new Act. A simple fix such as enacting a nominal federal income tax (say 1%) would have significantly enabled the sharing of data between Federal and State Tax agencies. It could also be used as tool to transfer funds to the vulnerable rather than the current opaque method done via the Ministry of Humanitarian Affairs.

The 35 Weak Links (State Internal Revenue Services)

If you live in Lagos, you might have reason to be slightly worried. The Lagos State Internal Revenue Service (LIRS) is an outlier—technologically advanced and aggressive. But for the rest of the country? The system is broken.

Aside from Lagos and perhaps the FCT, most State Internal Revenue Services (SIRS) are hollow institutions. They are often headed by political appointees—friends of the Governor with zero depth in tax administration or forensic accounting.

These agencies lack the software to analyze bank statements even if they had them. They lack the political will to compel their wealthy residents to pay the right amount of tax because these wealthy individuals may very well be the sponsors of those holding the highest political positions.

The State IRS rely almost exclusively on Pay-As-You-Earn (PAYE), where companies do the work for them by deducting taxes at the source. They lack the capacity to audit the millions of personal bank accounts within their domain. They are too weak to enforce collection on individuals who do not earn a salary.

The “Secondee” Loophole

The most glaring weakness of the ITA 2025 is that it was touted as a reform to capture the wealthy, yet it arguably makes it easier for the ultra-rich to slip away.

A major flaw exists in the definition of taxable income regarding “Secondees”—expatriates or Nigerians seconded from foreign firms to work in Nigeria. The Act appears to completely exempt the income of a secondee if they can prove they are paying taxes in their “home country.”

This is a massive oversight. It means a high-earning executive earning $20,000 a month in Nigeria can avoid paying any tax to the Nigerian state by presenting a tax receipt from a low-tax jurisdiction or their home country. While the average Nigerian employee has their tax deducted at source, the high-net-worth individual with complex global income sources is given a legal exit route. If the law cannot even capture the clearly defined income of a corporate executive, it certainly lacks the sophistication to scrutinize the murky inflows of a personal savings account.

Bank Turnover ≠ Taxable Income

Finally, there is a legal hurdle that the tax authorities have not cleared. A credit alert in your bank account is not proof of income. If your spouse transfers money to you for school fees, that is not income. If you sell a used car and the buyer transfers cash, that is a return of capital, not necessarily profit. If you receive a refund for a failed transaction, that is not income.

For a tax authority to tax your bank account, it must first distinguish between revenue and income. This requires a level of forensic auditing that simply does not exist at the state level. They cannot simply apply a flat tax rate to your total credit alerts without facing lawsuits they would almost certainly lose in a working judiciary.

Conclusion

While ITA 2025 has rearranged the furniture, the house remains the same. As long as the collection of personal income tax is left to 36 disparate, under-resourced, and politically compromised State Boards, your bank account remains relatively safe.  And as long as every Nigerian does not pay personal income tax to the center, the current tax reforms from a personal income perspective are inchoate.

The taxman may bark, but until the constitution is amended to centralize personal tax collection—or until the States wake up and employ technocrats rather than politicians—he has no teeth to bite your savings.

Eben Joels is the Managing Partner of Stransact Chartered Accountants, an audit, tax, and consulting firm in Nigeria. He is also a subject-matter expert in International Tax and Financial Reporting Standards and a licensed attorney.