Fear, Not Law, Threatens Nigeria’s Financial Inclusion Gains
Uncertainty at the Point of Payment
WHEN Abuja-based furniture maker Okonkwo Azuka secured his first contract of the year, the challenge was not the craftsmanship required but how he would be paid. The ₦500,000 deal stalled as his customer hesitated to make a bank transfer, fearing that Nigeria’s new tax reforms might trigger unexplained deductions.
Mr. Azuka himself shared the concern. “I don’t want government taking something I don’t even know about,” he said, asking whether taxes would be deducted automatically from the payment. Although the law does not permit banks to debit personal accounts for taxes on one-off transfers, uncertainty lingered. The transaction only proceeded after failed attempts to reach a bank official for clarification.
Such anxieties are becoming increasingly common among artisans and small traders, raising concerns that Nigeria’s financial inclusion gains may come under strain, not because of the substance of the reforms, but due to how they are perceived.
What the New Tax Laws Aim to Achieve
The tax reforms, which took effect in January, were designed to simplify revenue collection, reduce multiple levies, and protect low-income earners. Under the new framework, individuals earning ₦800,000 or less annually pay no personal income tax or capital gains tax, while businesses with turnover below ₦100 million are exempt from company income tax. Essential goods and services such as food, healthcare, education and transport remain VAT-exempt.
Officials insist the reforms are pro-poor and inclusion-friendly. Taiwo Oyedele, chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, has repeatedly stressed that banks are not authorised to deduct taxes from personal accounts.
“There is no scenario where government simply takes money from your account,” he said, adding that tax liabilities require formal assessments, dispute processes and, where necessary, court orders.
Fear Reshaping Informal Transactions
Despite these assurances, misinformation has spread rapidly, particularly on social media. Some Nigerians now advise describing transfers as “gifts” or avoiding digital payments entirely.
In Abuja’s Lugbe area, building contractor Kehinde Lawal said artisans have begun charging extra fees when payments are made through banks. One bricklayer increased his labour charge by ₦30,000 on a ₦200,000 job, citing potential tax exposure.
“If I’m not clear, I will protect myself,” the worker reportedly said.
Similar patterns are emerging in Aba, a major hub for tailoring and garment production. Fashion designer Amanda Okpala said she now discourages large transfers, fearing frequent inflows could attract tax scrutiny.
“When money enters your account, nobody explains what happens next,” she said. “That uncertainty scares people.”
Financial Inclusion at Risk
Experts warn that such behaviour reflects uncertainty rather than resistance. Financial inclusion specialist Akinlabi Adegoke noted that digital payments gained traction because they felt safe and convenient.
“When digital activity begins to feel like a gateway to tax scrutiny, anxiety naturally follows,” he said, warning that even perceived risk can push informal workers back toward cash.
Nigeria’s financial inclusion rate rose to 64 per cent in 2023, according to EFInA, but exclusion remains highest among informal workers and low-income earners. With digital payments often serving as the first entry point into formal finance, prolonged uncertainty could erode years of progress.
The Communication Gap
Tax experts say the fears stem largely from misunderstanding. Afeez Ismaila, a tax consultant, emphasised that not all deposits are taxable and that personal accounts used for non-business purposes are not subject to automatic taxation.
However, he acknowledged that expanded registration requirements and increased digital reporting for larger businesses may feel intimidating to informal operators.
“New visibility feels like surveillance before benefit,” he said.
Government Response
The government has dismissed calls to suspend the reforms. Zacch Adedeji, head of the Nigeria Revenue Service, said opposition was driven by misinformation and vested interests.
“These reforms are meant to protect the poor and strengthen the economy,” he said, adding that only amendments—not suspension—would be considered.
Analysts argue that clearer communication, targeted education and trusted local channels will be critical to ensuring the reforms do not inadvertently reverse financial inclusion gains.
