Nigeria’s tax reforms are capturing more everyday transactions, from bank transfers to digital subscriptions, potentially increasing the average consumer’s monthly tax exposure

For many consumers, the perception of higher taxes comes not necessarily from a single large deduction but from the growing number of small charges attached to everyday transactions.

For Blessing Yohanna, a Point-of-Sale (POS) operator in Obalende, the growing number of small deductions has become a frequent source of concern to operators.

“As of last year, when we transferred amounts above N10,000, they deducted N15 or N20 only,” she said.

“This year, they are deducting N20, and on top of that, they still take charges for electricity and stamp duty. Altogether, the total deduction is about N120.”

Experiences like this reflect a broader shift taking place within Nigeria’s tax system. Where taxes were previously encountered mainly in retail purchases, they now appear across digital payments, subscription services, and other routine financial activities.

Part of the shift, according to tax analysts, is being driven by greater awareness and enforcement following the introduction of the new tax framework.

Boluwatife Agbato, a tax professional, said the recent reforms were accompanied by significant public communication that has increased awareness of tax obligations among businesses and individuals.

“The new tax system came in with a lot of public awareness,” he said. “That awareness has increased compliance around transactional taxes.”

One area where this shift is becoming visible is in how small businesses handle value-added tax.

In the past, many small online vendors and informal businesses often did not include the 7.5 percent Value Added Tax on their invoices. But that practice is gradually changing.

“Previously, most online vendors and small businesses did not add VAT to their invoices,” Agbato said. “But there is now a noticeable surge in VAT collection.

Nigeria’s VAT collections have risen significantly in recent years following reforms introduced through the 2019 Finance Act.

The shift toward capturing more transactions is also reflected in rising tax collections.

Latest data from the Federation Accounts Allocation Committee (FAAC) shows that N1.08 trillion was collected as VAT by the Nigeria Revenue Service (NRS) in January 2026, up from N913.96 billion in December 2025.

The expansion of consumption taxation is already visible in government revenue data.

As Nigeria continues to rely more heavily on consumption taxes to boost revenue, the key question will be whether the expanding tax net can raise government income without deepening the cost-of-living pressures already facing households.

The growing attention to transaction-based taxes is also evident in enforcement practices.

According to Agbato, tax authorities are increasingly focusing on taxes tied directly to financial transactions, such as stamp duties and electronic transfer levies.

Stamp duties, which apply to certain financial transactions and documents, are seeing increased scrutiny during tax audits and investigations, reflecting a broader effort to capture more taxable activities.

“The way tax authorities now approach audit and investigation exercises shows that transactional taxes are receiving more attention,” he said.

These developments come as Nigeria continues to search for ways to increase government revenue in a country where tax collection remains relatively low compared with the size of the economy.

However, the widening of the tax net may also carry consequences for businesses and financial inclusion.

According to Agbato, the additional burden created by expanded compliance requirements often falls most heavily on businesses.

“The widening of the tax net increases the tax burden,” he said. “In many cases, that burden is financial, particularly because most of the compliance requirements fall on businesses.”

There are also concerns about the effect of transaction-based levies on the adoption of digital financial services.

Digital payments have been a major driver of financial inclusion in Nigeria over the past decade, but increasing levies attached to electronic transactions could slow that progress.

Agbato noted that fears around how authorities might tax bank transactions have already created uncertainty among some users of the financial system.

“The increasing levies and the looming fear around how the government intends to tax people’s bank accounts can discourage financial inclusion,” he said.

He added that improving public understanding of the tax system will be critical as reforms continue.

“There is a strong need for more tax education so people understand what is being taxed and why,” he said.

But one trend is becoming increasingly clear: as more economic activity becomes digital and traceable, a growing number of everyday transactions are gradually falling within Nigeria’s formal tax net. (BusinessDay)

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