FOLLOWING the implementation of the new tax law in January 2026, many Nigerian business owners have mandated their customers to use misleading narrations in bank transfers in an attempt to avoid possible tax deductions. In this report, The FactCheckHub examines what Nigerian tax laws actually say about transfer narrations and whether they have any bearing on tax obligations.

Since January 1, when the Federal Government announced that the new tax law would take effect, Hamza Arabbi Kuraye, a provisions seller in Kubwa, Abuja, has instructed his customers to always write “gift” as the narration when making bank transfers for purchases.

He said he took the step after hearing rumours that the Federal Government would begin deducting taxes from payments for goods and services based on the narration attached to bank transfers.

“I tell people to write ‘gift’ as narration if the transfer or amount of goods bought is ₦10,000 or less than ₦10,000,” Hamza said.

He is not alone. A Point-of-Sale (POS) agent in Lugbe, Abuja, Ruth Ozobu shared a similar belief. “It was explained to us that if someone is buying something from you, it is better to write a narration like ‘gift’ so that when the government wants to remove tax from your money, they will not touch it,” Ruth said.

“Just like when your parents send you ₦50,000 for foodstuff or allowance, it’s better to add ‘foodstuff’ or ‘gift’ as narration so the government will understand that it isn’t income.

As a POS attendant, I get more than ₦500,000 a month—now imagine how much I would make in six months. Will they remove tax from that money? And on days I receive gifts, will they also remove tax from that money, thinking it was income?” she asked.

READ : Misleading claims on new personal income tax act circulates online

The experiences of Hamza and Ruth reflect a growing practice among Nigerian business owners and informal sector workers who believe that bank transfer narrations determine whether a transaction is taxable, a perception that has spread largely through rumours and informal explanations rather than official guidance from tax authorities.

Deluge of misinformation around Nigeria tax law

The misconceptions about transfer narration join a stream of misinformation that has clouded the New Tax Act, 2025 (NTA), since its announcement in 2025.

The Tax Act is a comprehensive legislation that consolidates and replaces several existing tax laws, including the Companies Income Tax Act, Personal Income Tax Act, Capital Gains Tax Act, Value Added Tax Act, Petroleum Profits Tax Act, and Stamp Duties Act.

The Act which has been followed by criticism and controversy was signed by President Bola Ahmed Tinubu into law on June 26, 2025 and took effect on January 1, 2026.

The process began in July 2023 with the creation of the Presidential Committee on Fiscal Policy and Tax Reforms, led by Taiwo Oyedele.

The ICIR reported that the Act was said to have been introduced to simplify Nigeria’s tax system, harmonise tax administration, expand the tax base, and modernise tax practices in line with global standards. The report also outlined what business owners need to do and the things to put in place.

The FactCheckHub reported that there has been a deluge of misinformation surrounding the law. For instance, a claim that under the new tax law, Nigerians would pay N500 as tax on every 10,000 spent on fuel circulated online in September 2025.

The claim was circulated on the internet since the announcement of the 5 per cent tax on petrol and diesel.

The regulation requires that the surcharge be applied to every supply or sale of refined fossil fuel products in Nigeria, whether locally produced or imported, with the money collected at the point of purchase. Cleaner fuels, such as renewable energy sources, household kerosene, cooking gas (LPG), and compressed natural gas (CNG), are exempt.

According to the purveyors, the regulation was recently introduced in the new tax law. However, findings by The FactCheckHub show that the Tinubu administration has not introduced a new tax, but rather reactivated an existing provision that had long remained unenforced.

The claims that starting in January 2026, Nigerians earning ₦800,000 and above annually will be required to pay 20 per cent personal income tax, under President Bola Tinubu’s new tax reforms, also spread like wildfire last year.

But checks by The FactCheckHub show that under the new Nigeria Tax Act 2025, individuals earning ₦800,000 or less per year are fully exempt from personal income tax. The progressive rates start at 15 per cent for incomes above that threshold, with the highest 25 per cent rate applying only to incomes above ₦50 million.

What is transaction narration and what the tax law actually said

A transaction narration refers to the short description attached to a bank transfer or payment. It is commonly used to indicate the purpose of a transaction, such as payment for goods, services rendered, loan repayment, or gifts. While narrations may help the sender and recipient understand a transaction, they do not determine the tax treatment of the funds involved. Under Nigerian tax administration, transactions are assessed based on their economic substance rather than the wording used in bank transfer descriptions.

Claims suggesting that Nigeria’s new tax regime allows authorities to deduct taxes automatically based on bank transfer descriptions are unfounded. A review of the country’s tax laws shows that transaction narrations play no role in determining whether a transfer is taxable.

Officials involved in shaping the reforms have consistently rejected the notion that tax agencies are tracking or analysing transfer descriptions to impose deductions.

They say no mechanism permits tax authorities to monitor individual bank transactions or debit accounts simply because a transfer is labelled as a payment for goods or services.

Taiwo Oyedele, who chairs the Presidential Committee on Fiscal Policy and Tax Reforms, has addressed the concern publicly, describing it as a misconception.

He explained that Nigeria does not operate a system where taxes are automatically pulled from personal bank accounts based on transfer activity or wording.

“There is no tax man in the world that has the capacity to go after everyone,” he said while speaking on Channels TV in December.

Oyedele explained that ordinary bank users should not worry about how they describe transfers.

“Any amount of money you transfer, whether it’s $1 billion, whether it’s $1,000, it doesn’t matter how you describe it.”

“Nobody will debit your bank account. At the end of the year, you tell the government yourself,” he said.

He added that the reformed tax system relies on self-declaration.

“You know the amount that is your income. You know the one that is not your income.

“So you tell the government, this is my income, and here is the tax. If you’re exempted, you don’t need to pay any tax. Just say this is my income, and I’m exempted from tax,” Oyedele said.

Oyedele further noted that the ongoing tax reforms do not assign banks the role of policing everyday financial transactions on behalf of the government. Instead, the tax system relies on established assessment processes.

An examination of the Nigeria Tax Act 2025 shows that taxation is built around voluntary disclosure and formal assessment. Individuals and businesses are taxed on identifiable income streams such as wages, business earnings, rent, dividends, and similar sources not on the mere movement of money in and out of bank accounts.

As such, routine transfers, gifts, and internal movements of funds do not, by themselves, trigger tax liabilities under Nigeria’s current tax framework.

The FactCheckHub reached out to a financial expert, Adeniyi Asade, Associate Chartered Accountant, Association of Chartered Certified Accountants. He explained that there is no existing mechanism that enables tax authorities to automatically debit individuals’ bank accounts based on the narration attached to it.

On how misinformation concerning tax emerged, he said, “Tax avoidance sentiments are a major driver of the rapid spread of misinformation. Many individuals are naturally resistant to paying taxes, so any narrative that appears to offer a way to “beat the system’ tends to gain quick traction.

READ ALSO : No, Tinubu government has not introduced new fuel tax starting January 2026

On the implications of using misleading narrations, he noted that an entire year’s worth of transactions consistently described as gifts or donations is unlikely to be accepted at face value and may be reclassified for tax purposes based on economic reality.

“Incorrect or misleading narrations could expose taxpayers to additional tax assessments, penalties, and compliance issues,” he added.

He stressed that while transaction narration remains a helpful record-keeping tool, it should be used accurately and honestly, adding that compliance under the Nigeria Tax Act, 2025, is ultimately determined by the true nature of transactions, not merely how they are described.

“Tax assessments are therefore based on actual financial activity and statutory provisions rather than informal descriptions attached to transactions.”

Meanwhile, at the sub-national level some state governments has said they would recover unpaid tax through bank, tenants and other such means, this still has nothing to do with  narrations on transactions.