How Nigeria plans to use banks and fintechs to recover tax debt

This is Follow the Money, our weekly series that unpacks the earnings, business, and scaling strategies of African fintechs and financial institutions. A new edition drops every Monday. 

Banks, fintechs, and other financial institutions will now serve as debt recovery agents for Nigeria’s tax authority from 2026, according to TechCabal’s analysis of the newly implemented Nigeria Tax Administration Act, 2025.

Nigeria’s sweeping tax reforms have now taken full effect. The Federal Inland Revenue Service (FIRS) has been replaced by the Nigeria Revenue Service (NRS), stamp duties have supplanted electronic transfer levies, shifting the burden to senders, and the country’s most comprehensive tax overhaul in decades has moved from policy to enforcement.

The new law gives the NRS the power to outsource tax debt recovery to third parties, turning banks, fintechs, and other financial institutions into extensions of the tax authority. Once statutory recovery steps are exhausted, these entities can be tasked with recovering unpaid taxes directly from where money is held, a shift that could boost compliance but raises fresh concerns about oversight and safeguards.

Turning banks, fintechs into tax collectors

“The relevant tax authority may assign outstanding tax debts in whole or in part, to an accredited third party who shall assume responsibility for recovering the tax debts in accordance with the provisions of this Act or regulations issued by the Service,” the law reads.

Third parties are defined to include banks and other financial institutions, debt recovery practitioners, or any other person accredited by the relevant tax authority.

This is not Nigeria’s first attempt at third-party tax recovery. In 2018, the now-defunct FIRS and some State Internal Revenue Services appointed commercial banks as agents to recover taxes allegedly owed by customers, relying on provisions that allowed tax authorities to appoint any person as an agent of a taxpayer for collection purposes. Those efforts were largely controversial.

The 2025 Act now provides clearer statutory backing, opening the door to direct recovery from the source. For the NRS, this means deeper access to where money actually sits.

How other countries do it

Nigeria is not alone in this approach. In 2025, HM Revenue & Customs (HMRC) in the United Kingdom relaunched its programme to recover unpaid taxes directly from debtors’ bank accounts.

Under the UK model, the power applies to debts of £1,000 ($1,343) or more and comes with safeguards. HMRC only acts after appeals have been exhausted and repeated attempts to contact the debtor have failed. Every affected taxpayer receives a face-to-face visit from HMRC officers before funds are accessed, with options such as time-to-pay arrangements discussed.

The UK’s renewed enforcement push comes as £42.8 billion ($57.48 billion) in taxes remains unpaid.

Nigeria’s enforcement push

Nigeria’s tax reforms aim to raise the country’s tax-to-GDP ratio to 18% by 2027, from under 10%, and have expanded the scope of taxable income to pull more people, especially digital and remote workers, into the tax net.

Under the new tax regime, failure to register with the NRS attracts a ₦50,000 ($34.94) fine in the first month and ₦25,000 ($17.47) for each subsequent month. Failure to file returns attracts a ₦100,000 ($69.89) fine in the first month and ₦50,000 monthly thereafter. Unpaid taxes also attract a 10% penalty and additional interest at the prevailing monetary policy rate.

Beyond penalties, the tax authority can now recover outstanding amounts directly, through third parties, once statutory recovery steps have been exhausted.

NRS Penalty Estimator

See how fines stack up under the 2025 Tax Act.

1. Select Infraction

Unregistered Unfiled Returns

Fine: ₦50,000 (Month 1) + ₦25,000/mo

2. Duration Overdue

1 Month

Low Risk High Exposure

Estimated Penalty

₦50,000

Approx. $34.94

Early Stage: The penalty is fixed. Paying now avoids interest accumulation and enforcement.

Source: TechCabal Analysis / Tax Act 2025

What qualifies as tax debt?

The Act defines tax debt broadly to include: taxes unpaid after 30 days; when due tax plus penalties and interests are not paid after a notice period; under-assessed taxes; and erroneously repaid tax reliefs.

Taxpayers who were under-assessed are expected to pay the shortfall on demand, while those who received repayments in error are required to return them.

However, tax authorities can only assign a debt to a third party after all legal recovery steps, including issuing notices, making payment demands, and pursuing other enforcement actions, have been exhausted. The debt must also be of significant value and outstanding for a period deemed appropriate by the authority.

Affected taxpayers are to be notified in writing and informed of the third-party handling recovery. The tax authority also retains the right to revoke the assignment and resume recovery itself.

Limits and exemptions

The law places a six-year limit on recovering tax debts arising from under-assessment or erroneous repayment, except where the “under assessment or erroneous repayment was caused by the production of a document or the making of a statement which was found to be untrue.”

Nigeria plans to generate at least ₦17.85 trillion ($12.48 billion) in tax and customs revenue in 2026, a goal that relies heavily on technology and data integration. The NRS will link its systems with transaction-heavy institutions, including Nigeria Inter-Bank Settlement System Plc (NIBSS), giving it visibility into financial flows.

As bank accounts become increasingly tied to tax identification numbers, the government is closing avenues for evasion and moving enforcement closer to where revenue is actually held. But while the law borrows from global best practices, it is silent on safeguards, particularly on how third-party recovery will be restrained, supervised, or challenged.