Nigeria’s sweeping tax reforms could inadvertently create the world’s first artificial intelligence-native tax system as millions of citizens unfamiliar with formal taxation struggle to navigate new compliance rules, Yvonne-Faith Elaigwu, head, operations and governance at OnePipe, has said.
The reforms, signed into law last year and implemented from January 1, 2026, consolidated more than 60 taxes and numerous informal levies into a unified framework aimed at expanding the country’s tax base.
But for many Nigerians, especially those operating in the vast informal economy, the sudden introduction of formal tax obligations has created confusion rather than clarity.
“There is a woman I often think about when discussions turn to Nigeria’s new tax laws,” Elaigwu told BusinessDay.
Elaigwu described a small food vendor selling ewa agoyin in the Ogba area of Lagos who began using a bank account only a few years ago to receive transfers from customers. Like millions of Nigerians, she likely uses the same account for business transactions, family support, school fees and household expenses.
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“For people like her, there has never been a clear line between personal and business income. She has run her canteen for nearly a decade and no one ever explained that she might have tax obligations,” Elaigwu said.
Nigeria’s tax-to-GDP ratio, estimated at about 7.9 percent, remains among the lowest globally and roughly half the African average. Policymakers have long argued that broadening the tax base is necessary to improve public revenue.
The challenge is structural. According to data from the National Bureau of Statistics, about 93 percent of Nigeria’s employed population works in the informal economy. Before the reforms, only about 15 percent to 20 percent of working-age Nigerians were captured within the formal tax system.
The new laws attempt to close that gap. Individuals earning below N800,000 annually are exempt from personal income tax, while every Nigerian with a National Identification Number now automatically has a tax identification number. For companies, the Corporate Affairs Commission registration number now doubles as a tax ID.
While the policy expands the net dramatically, it has also raised questions about how first-time taxpayers will understand and comply with the system.
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Early reactions offered a glimpse of the uncertainty. Shortly after the reforms took effect, social media platforms and messaging groups circulated tips advising Nigerians to label bank transfers as gift or family support. Authorities later clarified that tax compliance would rely on self-declaration rather than automated monitoring of transaction descriptions.
Elaigwu said the episode highlighted widespread confusion rather than deliberate tax evasion.
“If educated, digitally savvy Nigerians were panicking, what hope does the average informal trader have?” she said.
This is where generative artificial intelligence could play a transformative role.
Rather than requiring individuals to interpret complex tax laws themselves, AI tools could explain rules in simple language, analyse transaction patterns and guide users through filing obligations.
“Compliance is a personal problem. People simply want to know what counts as income for them, whether they owe anything and how to pay,” Elaigwu said.
Generative AI systems could potentially turn that process into a conversational interface, guiding users step-by-step through tax rules and identifying exemptions or liabilities based on their financial activity, she said.
Some Nigerian startups are already experimenting with AI-assisted financial and tax advisory tools, reflecting a broader global trend toward automated compliance services.
However, significant obstacles remain. Trust in automated systems is limited, data quality across financial platforms is uneven and privacy regulations require explicit user consent for financial data analysis.
Accuracy is also critical. Incorrect tax guidance could expose individuals and businesses to penalties.
Despite the risks, Nigeria’s history of technological leapfrogging suggests the idea may not be far-fetched.
The country largely skipped landline telephony in favour of mobile networks and rapidly embraced mobile payments and agency banking in areas where traditional bank branches were scarce.
“The infrastructure for an AI-enabled compliance system is not hypothetical. Millions of Nigerians are entering the tax system for the first time, and most simply do not understand how it works,” Elaigwu said.
That dynamic could make Nigeria an unexpected testing ground for large-scale AI-driven tax compliance.
If successful, the country could offer a model for integrating millions of informal workers into a formal fiscal system. If not, analysts warn the gap between policy design and real-world implementation could widen significantly.
“The laws have created the most compelling use case for generative AI in Nigerian finance we’ve seen yet. The question is whether technology can bridge the gap between policy and everyday reality,” Elaigwu posited.
