Nigeria’s most ambitious tax overhaul in decades has moved beyond policy announcements and into active enforcement, quietly reshaping how unpaid taxes will be recovered across the financial system.
With the Nigeria Tax Administration Act, 2025 now in force, the Federal Inland Revenue Service (FIRS) has been replaced by the Nigeria Revenue Service (NRS), and the country’s tax machinery has been retooled for deeper reach and stricter compliance. Among the most consequential changes is a provision that allows the tax authority to outsource tax debt recovery to third parties—effectively turning banks, fintechs, and other financial institutions into extensions of the state’s collection apparatus from 2026.
The reform package has already delivered visible changes. Stamp duties have replaced electronic transfer levies, shifting the cost burden to senders of funds. Registration, filing, and payment obligations now come with steeper penalties. More importantly, enforcement is no longer limited to notices and court actions; it is being repositioned closer to where money is actually held.
Banks and fintechs as recovery agents
Under the new law, the NRS is empowered to assign outstanding tax debts, in whole or in part, to accredited third parties once statutory recovery steps have been exhausted. The Act explicitly defines these third parties to include banks, other financial institutions, licensed debt recovery practitioners, or any person accredited by the tax authority.
“The relevant tax authority may assign outstanding tax debts… to an accredited third party who shall assume responsibility for recovering the tax debts in accordance with the provisions of this Act,” the legislation states.
In practical terms, this means that once a taxpayer has ignored notices, failed to comply with payment demands, and exhausted other legal remedies, recovery can shift directly to institutions that control or process their funds. For the NRS, the approach offers a more direct path to collections. For financial institutions, it introduces a new compliance burden and a sensitive role that blurs the line between customer service and tax enforcement.
A familiar but controversial path
Nigeria has experimented with third-party tax recovery before. In 2018, the now-defunct FIRS and several State Internal Revenue Services appointed commercial banks as agents to recover taxes allegedly owed by customers. Those efforts, which relied on broad agency provisions in earlier tax laws, sparked controversy and legal uncertainty, particularly around due process and customer protections.
The 2025 Act attempts to address those gaps by providing clearer statutory authority and outlining conditions under which debts can be assigned. Unlike earlier efforts, the new framework explicitly ties third-party recovery to the exhaustion of legal recovery steps and requires formal notification to affected taxpayers.
How it works elsewhere
Nigeria’s approach mirrors practices already in use in other jurisdictions. In the United Kingdom, for example, HM Revenue & Customs (HMRC) revived its programme in 2025 that allows it to recover unpaid taxes directly from debtors’ bank accounts.
The UK model, however, comes with defined safeguards. The power applies only to debts of £1,000 or more and is triggered only after appeals have been exhausted and repeated attempts to contact the taxpayer have failed. Before any funds are accessed, HMRC officers conduct face-to-face visits, during which alternatives such as time-to-pay arrangements are discussed.
The renewed UK enforcement drive comes against the backdrop of £42.8 billion in unpaid taxes, highlighting the fiscal pressure that often drives such measures.
Nigeria’s enforcement push
Nigeria’s tax reforms are designed to raise the country’s tax-to-GDP ratio to 18% by 2027, up from less than 10% today. To achieve this, the new regime expands the scope of taxable income and pulls more individuals—especially digital and remote workers—into the tax net.
The penalties for non-compliance are steep. Failure to register with the NRS attracts a ₦50,000 fine in the first month and ₦25,000 for each subsequent month. Failure to file returns draws a ₦100,000 penalty in the first month and ₦50,000 monthly thereafter. Unpaid taxes also attract a 10% penalty plus interest at the prevailing monetary policy rate.
Beyond fines, the Act gives the NRS the ability to pursue direct recovery through third parties, making enforcement faster and potentially more effective once all statutory steps have been completed.
What counts as tax debt?
The law defines tax debt broadly. It includes taxes unpaid after 30 days, assessed taxes plus penalties and interest that remain unpaid after notice periods, under-assessed taxes, and tax reliefs or refunds paid in error.
Taxpayers who were under-assessed are required to pay the shortfall on demand, while those who received erroneous refunds must return them. However, assignment to third parties can only occur after notices have been issued, payment demands made, and other enforcement actions pursued. The debt must also be of significant value and outstanding for a period deemed appropriate by the tax authority.
Taxpayers must be notified in writing when a debt is assigned, and the NRS retains the right to revoke the assignment and resume recovery itself.
Limits, data, and open questions
The Act places a six-year limit on recovering tax debts arising from under-assessment or erroneous repayment, except in cases involving false statements or untrue documents. At the same time, Nigeria plans to generate at least ₦17.85 trillion in tax and customs revenue in 2026, a target that depends heavily on technology and data integration.
To support this, the NRS will link its systems with transaction-heavy institutions such as the Nigeria Inter-Bank Settlement System (NIBSS), giving the authority deeper visibility into financial flows. As bank accounts become increasingly tied to tax identification numbers, avenues for evasion are narrowing.
Yet while the law borrows from global best practices, it remains largely silent on detailed safeguards. Questions linger around how third-party recovery will be supervised, how disputes will be handled in real time, and what protections will exist for customers caught in recovery actions.
As enforcement shifts closer to the source of funds, Nigeria’s tax system is entering a more assertive phase—one that promises higher compliance, but also demands careful oversight to balance revenue goals with trust in the financial system.