Nigeria’s compulsory Tax ID may clash with financial inclusion drive

Nigeria’s plan to make Tax Identification Numbers (TINs) mandatory for all taxable persons by January 2026 is being promoted as a major step toward modernising the country’s fiscal system.

Policymakers say the reform will help expand a chronically narrow tax base, reduce dependence on oil revenue, and bring millions of informal workers into the formal economy.

Yet analysts warn the push could create fresh barriers to financial inclusion in a country where more than a third of adults remain unbanked and where digital ID systems face duplication, bottlenecks, and limited coverage.

They caution that unless the rollout is carefully managed, a policy designed to expand the tax net could end up excluding the very groups it seeks to integrate.

Nigeria’s tax-to-GDP ratio stood at 13.5 percent at the end of 2024, up from 10.9 percent in 2021, but still among the lowest in Africa and far below the OECD average of 34 percent.

Successive administrations have pledged to raise non-oil revenue, and the Federal Inland Revenue Service, backed by the finance ministry and the central bank, has now ruled that from 2026 all taxable persons must obtain a Tax ID.

In practice, this could mean presenting a TIN when opening a bank account, applying for loans, registering property, or completing other financial transactions.

But the risk of exclusion looms large. Data from Enhancing Financial Innovation and Access (EFInA) show that only about 64 percent of Nigerian adults use formal financial services, leaving roughly 30 million people outside the banking system.

The gap is starkest among low-income households: only 47 percent of adults in the poorest quintile have a National Identification Number (NIN), compared to 76 percent in the wealthiest.

“If the government links tax IDs to banking services without first ensuring universal coverage, you could see people pushed out of the system rather than brought in,” warned a Lagos-based financial inclusion expert.

Ordinary Nigerians share these concerns. “I have a bank account, but I don’t even have an NIN yet. If they block me because of tax, what happens to my savings?” asked Mama Bola, a small trader in Lagos.

The government has sought to align multiple identity systems, including the Bank Verification Number (BVN), the NIN, and the Corporate Affairs Commission (CAC) database, but overlapping records and slow progress remain major obstacles. For banks and fintech firms, mandatory TINs could raise onboarding costs and slow customer growth.

For the unbanked, they could add new hurdles to accessing basic savings and credit products.

Nigeria has set an ambitious goal of achieving 95 percent financial inclusion by 2024, but only about 74 percent was reached in 2023.

Analysts say layering compulsory tax registration on top of weak identity infrastructure risks undermining these efforts.

“The government’s fiscal ambition is understandable,” an Abuja-based economist observed.

“But reforms that appear coercive, or that make it harder for ordinary people to transact, risk undermining trust in the financial system.”

Some experts, however, see potential benefits.

Lagos-based tax consultant Akinbobola Christopher said compulsory TINs could formalise millions of small businesses, improve tax planning, and strengthen access to credit by creating verifiable income histories. He added that the policy could also accelerate digital transactions and provide government with more reliable data for policymaking.

Still, he warned that without simplified registration and rural outreach, the reform could exclude millions, drive more activity into the cash economy, and burden small enterprises with compliance costs.

He recommended deploying mobile registration units to underserved communities, integrating TINs with existing IDs to avoid duplication, and offering incentives such as tax rebates for micro and small businesses that adopt digital payments.

For investors, the reform represents a test of Nigeria’s ability to implement complex policy changes in a way that supports, rather than undermines, economic governance.

Success could improve transparency, broaden the tax base, and strengthen the investment climate.

Failure could deepen compliance challenges, discourage investment, and widen exclusion.

As the 2026 deadline approaches, the government faces a delicate balancing act: raising revenue without locking millions out of the financial system.

The outcome will shape not only fiscal resilience but also the credibility of Nigeria’s broader economic reform agenda.