Tax Reform Law Prescribes Banks Reporting Customers Accounts Monthly Transactions Above N5 Million

Nigeria’s tax landscape is undergoing a significant transformation with the introduction of the 2025 Tax Reform Act. As part of this reform, Nigerian banks are now required to report customer accounts with monthly transactions exceeding N5 million to the Federal Inland Revenue Service (FIRS) and other relevant tax authorities.

This move aims to enhance tax compliance, curb financial irregularities, and align Nigeria’s fiscal structure with global standards.

Analysts believe that this initiative could significantly improve the government’s ability to track unreported income and boost revenue generation, particularly from the informal and high-net-worth segments of the economy.

The reform also introduces several taxpayer-friendly provisions. Individuals earning up to N800,000 annually, or N66,667 monthly, are now exempt from personal income tax, up from the previous threshold of N500,000. This change is designed to provide cost-of-living relief to low-income earners.

Additionally, the reform exempts capital gains on the sale of a primary residence and excludes up to N10 million in compensation for injury, job loss, or defamation from taxable income.

These provisions aim to offer broader financial protection to affected individuals.

Starting in 2026, a new Value-Added Tax (VAT) revenue distribution model will take effect. The Federal Government’s share will decrease to 10% from 15%, while State Governments’ share will increase to 55% from 50%. The allocation to State Governments will be based on a formula that includes equal sharing, population, and consumption. Local Governments will retain their 35% share.

This new model rewards high-consumption states like Lagos and Rivers, encouraging subnational governments to grow their local economies through increased internal revenue generation.

While financial experts have praised the move as a bold step toward expanding the tax base without imposing undue burdens on low-income citizens, privacy advocates and financial institutions have called for clear guidelines to ensure data protection and prevent potential abuse of the reporting system.

As implementation begins in 2026, stakeholders will closely monitor the impact on compliance rates, government revenue, and consumer behavior.

The success of this reform will depend on effective implementation and the ability of the government to balance revenue generation with taxpayer rights and protections.