By Jemimah Wellington, JKNewsMedia Correspondent
MONTHLY FINANCIAL transactions exceeding ₦5 million in Nigerian bank accounts will be reported to the nation’s tax authorities beginning in 2026, following the implementation of the new Tax Reform Act.
The National Orientation Agency (NOA) announced that this directive, outlined in Section 30 of the Act, mandates commercial banks to file monthly reports of such transactions directly to the Federal Inland Revenue Service (FIRS) and other relevant tax institutions.
The updated compliance rule is part of a wider reform package signed into law to enhance transparency in the financial system, tackle irregularities, and align Nigeria’s tax framework with international best practices.
As the primary executors of this directive, banks are now pivotal to the government’s mission to boost oversight and clamp down on tax evasion.
According to the NOA’s official communication via X (formerly Twitter), this provision forms a cornerstone of broader structural reforms aimed at plugging leakages and ensuring that taxable incomes are fully captured under federal tax policy.
The new law also introduces a range of relief measures targeting low- and middle-income earners.
Under Section 32, individuals earning ₦800,000 or less per year, approximately ₦66,667 monthly, will now be exempt from personal income tax.
This marks a notable increase from the previous ₦500,000 threshold and reflects the administration’s intention to protect economically vulnerable groups from excessive tax burdens.
Capital gains derived from the sale of a primary residence are now exempt from taxation under Section 31, creating added incentives for home ownership and shielding personal real estate sales from tax obligations.
Additionally, Section 50 provides further exemptions: compensation not exceeding ₦10 million for causes such as job loss, personal injury, or defamation will no longer be subject to tax.
The adjustment aims to enhance fairness and financial protection for affected citizens during distressing life events.
Starting in 2026, the reform introduces a revised VAT distribution formula.
The Federal Government’s share will drop to 10 percent from the current 15 percent.
States will receive 55 percent, up from 50 percent, and this portion will be split based on three criteria—equal sharing (50 percent), population (20 percent), and consumption (30 percent).
Local governments will retain their 35 percent share.
The revised formula incentivises consumption-heavy states such as Lagos and Rivers to boost internal revenue generation and take greater ownership of local economic development.
Industry watchers say the strategic blend of high-value transaction reporting and VAT redistribution marks a new chapter in Nigeria’s fiscal management.
By linking tax collection to economic activity and embedding fairness across the system, the government seeks to broaden the national tax base without placing undue strain on lower-income households.
Though the financial sector has generally welcomed the reform’s intent, calls have emerged from data privacy advocates and banking institutions urging the government to issue clear operational guidelines.
Stakeholders warn that without strong safeguards; mandatory transaction disclosures could raise concerns about confidentiality and the potential misuse of sensitive customer information.
They also note that as Nigeria prepares for the rollout in 2026, regulatory agencies and financial service providers are expected to align systems for efficient monitoring, while simultaneously addressing the legitimate privacy and compliance concerns raised by civil society.
