Nigeria is stepping up efforts to boost public revenue by targeting wealthy individuals through a data-driven tax monitoring system that focuses on lifestyle and spending habits. Rather than relying solely on self-declared income, authorities are now tracking digital footprints, luxury purchases, and financial transactions to identify underreported earnings. This shift signals a more aggressive approach to closing Nigeria’s tax gap and improving compliance among high-net-worth individuals.
Under Section 29 of the Nigeria Tax Administration Act, financial institutions—including banks, insurers, and stockbrokers—are required to report individuals with cumulative transactions of ₦25 million or more. Accounts with high monthly inflows are also flagged, creating a digital trail for tax authorities to analyze. Experts say this aligns Nigeria with global practices, where tax agencies use third-party financial data and spending patterns to verify income declarations and reduce tax evasion.
The new framework builds on past initiatives like the Voluntary Assets and Income Declaration Scheme (VAIDS), which encouraged Nigerians to disclose hidden assets. While VAIDS expanded the tax base, weak enforcement limited its long-term impact. The current system aims to close that gap by replacing voluntary disclosure with continuous monitoring, using real-time data from bank transactions, digital platforms, and asset ownership records.
Authorities are also expanding their scope beyond traditional banking systems. Lifestyle audits will now compare visible spending—such as luxury real estate, expensive vehicles, school fees, and offshore investments—with declared income. By integrating data from Bank Verification Numbers (BVN), National Identification Numbers (NIN), Corporate Affairs Commission (CAC) records, and even cryptocurrency platforms, regulators hope to uncover hidden wealth and strengthen tax enforcement.
However, analysts warn that the approach may face challenges in Nigeria’s complex and largely informal economy, where individuals often have multiple income streams or rely on credit to fund lifestyles. While the policy is designed to promote fairness, its success will depend on transparency, effective enforcement, and public trust. Ultimately, many Nigerians say their willingness to pay taxes will hinge on whether increased revenue translates into tangible improvements in infrastructure, healthcare, and public services.
source: Business day