As Nigeria continues to implement landmark tax reforms designed to modernise the country’s fiscal framework and widen the tax net ahead of the January 1, 2026 rollout of new tax laws, tax professionals are urging citizens to adopt correct bank payment narrations, a simple but crucial practice that can improve compliance and prevent unnecessary tax disputes.
President Bola Ahmed Tinubu signed four comprehensive tax reform bills into law in June 2025, overhauling the nation’s tax system through the Nigeria Tax Act, 2025, Nigeria Tax Administration Act, Nigeria Revenue Service Act, and the Joint Revenue Board Act. These reforms are expected to take effect early next year, significantly expanding what is considered taxable income and introducing a more progressive tax regime for individuals and businesses alike.
Under the new framework, Nigeria is reforming personal income tax structures, introducing clearer residency rules, and capturing a wider range of income , including digital and virtual assets under the tax net.
The reforms aim to create a fairer and more inclusive system while boosting government revenue and reducing dependency on oil.
Tax experts say that at a time when the tax regime is changing, accurate bank transfer narrations are more important than ever for taxpayers, particularly individuals and small business owners who frequently move money across accounts. Narrations help to distinguish between taxable income and non-taxable transfers, reducing the risk of being assessed for tax where none is due.
“Tax is fundamentally focused on taxable income; money you receive in exchange for services, employment, or business activity,” said a Lagos-based tax consultant. “If you fail to describe a transaction correctly in your bank transfer narration, you could end up paying more tax than necessary when filing your returns.”
Here are recommended standards for common transfer types:
Family Support & Gifts: When a family member sends you funds that don’t represent income, for example, for support or gifts — the narration should read: “Gift/Family support.”
Repayment of Personal Debts: When a friend or acquaintance reimburses you funds they previously borrowed, the narration should be: “Refund/Reimbursement.”
Personal Money Transfers: Moving your own money between your accounts should be recorded as “Personal transfer/Savings.”
Loans Received: If someone lends you money, the appropriate narration is “Loan received.”
Capital Contribution to Business: When you inject your funds into your enterprise, it should show “Capital contribution.”
Point of Sale (POS) Transactions: For POS operators, customers should specify “POS transfer” to distinguish the movement of payment from income.
Business Sales: In commercial transactions — for example, selling goods, customers should describe the payment clearly, such as “Payment for two cartons of Indomie.”
The practice is not just about bookkeeping discipline; it aligns with the evolving Nigerian tax regime that is tightening compliance and expanding the scope of assessable income, including digital and informal economic activities. Tax regulators are also stepping up enforcement mechanisms and penalty regimes for non-compliance as part of broader efforts to improve revenue collection systems.
Experts stress that accurate narrations prevent misclassification of transactions by both banks and tax authorities, thereby helping taxpayers pay only what is legitimately due under law and ensuring smoother tax filings when the reformed tax regime takes effect.
As Nigeria prepares for these reforms to come into force, individuals and businesses are advised to maintain transparent documentation and consult with tax professionals to navigate the changes without unintended liabilities.
