As Nigeria moves closer to the implementation of sweeping tax reforms scheduled to take effect on January 1, 2026, tax professionals are urging individuals and businesses to pay closer attention to how they describe bank transfers. According to experts, a simple detail such as a clear payment narration could help taxpayers avoid disputes and unnecessary tax assessments under the new regime.

President Bola Ahmed Tinubu signed four major tax reform bills into law in June 2025, marking one of the most comprehensive overhauls of Nigeria’s fiscal system in decades. The new laws include the Nigeria Tax Act, 2025, the Nigeria Tax Administration Act, the Nigeria Revenue Service Act, and the Joint Revenue Board Act. Together, they are designed to modernise tax administration, expand the tax base, and reduce the country’s reliance on oil revenue.

According to reports from tax advisory firms, the reforms will significantly broaden what qualifies as taxable income. They also introduce clearer residency rules for individuals and businesses and bring more income streams, including digital and virtual assets, into the tax net. The government says the goal is a fairer and more inclusive tax system that strengthens public finances.

Why transfer narrations now matter more

Tax experts say the changes make proper bank transfer narrations more important than ever, especially for individuals, freelancers, and small business owners who frequently move funds between accounts or receive payments from multiple sources.

A Lagos-based tax consultant explained that tax authorities focus primarily on income earned from employment, services, or business activities. “If a bank credit looks like income and there is no explanation attached, it may be treated as taxable,” the consultant said. “Clear narrations help distinguish income from non-taxable transfers such as gifts, loans, or personal savings.”

According to practitioners, poorly described transactions could lead to higher tax liabilities or time-consuming audits, particularly as regulators strengthen enforcement and data matching under the reformed tax framework.

Recommended narrations for common transactions

Tax professionals have outlined standard descriptions Nigerians can use to reduce confusion and improve compliance:

1. Family support and gifts: Transfers that are not income, such as support from relatives or gifts, should be labelled “Gift/Family support.”
2. Repayment of personal debts: When borrowed money is returned, the narration should read “Refund/Reimbursement.”
3. Personal transfers: Moving funds between your own accounts can be described as “Personal transfer” or “Savings.”
4. Loans received: Funds received as a loan should be clearly stated as “Loan received.”
5. Capital contribution: When business owners inject personal funds into their enterprises, the narration should be “Capital contribution.”
6. POS transactions: For point of sale operators, customers are advised to use “POS transfer” to separate transaction flows from business income.
7. Business sales: Payments for goods or services should describe the transaction clearly, such as “Payment for two cartons of Indomie.”

According to experts, these descriptions help banks and tax authorities classify transactions correctly, reducing the risk of misinterpretation.

Preparing for tighter compliance

Beyond record keeping, analysts note that accurate narrations align with the broader direction of Nigeria’s tax reforms. The new laws are expected to strengthen monitoring of both formal and informal economic activities, with stiffer penalties for non-compliance.

Tax advisers say maintaining clear documentation will make it easier for taxpayers to file returns and defend their positions if questions arise. They also encourage individuals and businesses to seek professional guidance as the effective date approaches.

As Nigeria counts down to the rollout of the new tax laws, experts agree on one point. Transparency in everyday financial transactions, starting with something as basic as a bank transfer narration, could save taxpayers from costly mistakes in the future.