Banks move to capture SMEs as tax reforms widen compliance net

Banks are rolling out zero-fee accounts and digital tools to attract small businesses just as Nigeria’s tax reforms tighten compliance requirements, effectively pushing more businesses into the formal economy.

The shift reflects a growing alignment between financial institutions and government policy, where easier access to banking is increasingly tied to stricter expectations around tax registration, record-keeping, and real-time reporting of transactions.

This alignment is driven by a broader fiscal objective to expand Nigeria’s revenue base and improve visibility across economic activity.

“An economy of this scale requires a more resilient revenue base,” said Chinwe Egwim, chief economist at First Bank.

“What we are seeing is a move from gaps to better coverage, where more businesses are brought into the system, and compliance becomes part of everyday operations,” Egwim added, explaining that the reforms are designed to integrate tax obligations into the daily functioning of businesses rather than treating them as an afterthought.

The banking push comes at a time when Nigeria’s new tax framework is shifting the country from a narrow revenue base to a broader, more structured system, with greater emphasis on compliance and visibility.

Nigeria’s tax-to-GDP ratio, estimated at below 10 percent, remains one of the lowest globally, highlighting the government’s longstanding challenge of capturing economic activity within the tax net.

Under the new reforms, small companies with annual turnover below N100 million are exempt from company income tax, development levies, and, in many cases, VAT filing obligations, a move aimed at encouraging informal businesses to formalise.

But while the exemptions reduce direct tax burdens, compliance expectations have expanded significantly.

Businesses are now required to register for tax identification numbers, maintain accurate financial records, issue tax invoices, and file returns regularly, obligations that were previously weakly enforced across much of the informal sector.

Industry analysts say banks are positioning themselves as the entry point into this new compliance-driven system, offering tools that simplify onboarding, including automated filing systems and integrated tax platforms aimed at reducing underreporting and improving revenue tracking.

“Digitisation and simplified systems are key enablers of compliance,” said Olarinde Olufemi. “Online self-service portals and electronic channels are designed to make compliance easier and reduce administrative burdens for taxpayers.”

For many small businesses, however, the biggest shift is not the tax itself, but the operational discipline now required.

“Getting it right means moving from reactive tax compliance to proactive governance,” Olufemi added, explaining that businesses must now embed tax considerations into daily operations, including pricing, procurement, and expansion decisions.

This includes the need for structured bookkeeping, timely filing of returns, and proper classification of transactions, areas where many informal businesses have historically lacked capacity.

The transition reflects a broader structural change in how the tax system interacts with businesses; the shift is expected to reduce manual processes and limit multiple data submissions.

However, concerns remain about the readiness of many small businesses to adapt, particularly those that still rely on informal record-keeping.

Tax professionals warn that businesses must take a more deliberate approach to compliance as enforcement becomes more data-driven.

Businesses are now expected to register, maintain proper records, and file returns consistently, with tax obligations increasingly embedded into everyday transactions.

For banks, this creates an opportunity to capture businesses as they formalise, onboarding them into a system where financial activity is more structured, traceable, and transparent.

As Nigeria’s tax reforms gain traction, the line between financial inclusion and regulatory oversight is becoming increasingly blurred.

For small businesses, entering the formal system now offers clear benefits, access to finance, structured support, and tax relief, but also introduces a higher level of scrutiny.

The message is becoming clearer: in Nigeria’s evolving economic landscape, growth and compliance are no longer separate paths but part of the same system. (BusinessDay)