Concerns are mounting among tax and financial experts following a move by the Lagos Internal Revenue Service (LIRS) to recover unpaid taxes through the direct debit of individual bank accounts. Analysts warn that the policy, if not clearly defined and carefully implemented, could trigger public panic, erode trust in the banking system, and undermine Nigeria’s ongoing tax reform efforts.

The controversy emerged after LIRS issued a notice citing Section 60 of the Nigeria Tax Administration Act as legal backing to recover outstanding tax liabilities by debiting bank accounts of defaulting taxpayers. The announcement quickly sparked debate across financial and policy circles, with many Nigerians expressing fear over the possibility of arbitrary access to their personal funds.

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While neither the Nigeria Revenue Service nor the Presidential Fiscal Policy and Tax Reforms Committee has formally withdrawn or contradicted the LIRS notice, the chairman of the committee, Taiwo Oyedele, attempted to calm public anxiety through a statement shared on 𝕏 (formerly Twitter). Oyedele clarified that the authority being referenced was not a blanket power but a regulated process known as the “power of substitution.”

According to him, the power of substitution allows a tax authority to direct a third party, such as a bank, to remit funds belonging to a defaulting taxpayer only after a tax liability has been conclusively established and remains unpaid. He stressed that the mechanism is applied strictly after all legal and administrative remedies, including appeals to the courts, have been exhausted.

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Despite this clarification, observers noted that Oyedele’s explanation appeared to contradict earlier assurances that the new tax laws did not empower any level of government to debit personal bank accounts directly. This perceived inconsistency has continued to fuel uncertainty and fear among taxpayers.

Reacting to the development, Dr Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise, said the conflicting positions must be urgently reconciled to prevent widespread misunderstanding. He warned that while tax reforms are necessary for national development, poor communication around enforcement tools could be counterproductive.

Yusuf disclosed that the uncertainty had already triggered panic reactions, with reports of Nigerians withdrawing money from banks out of fear that their accounts could be accessed without warning. According to him, such behaviour signals a dangerous loss of confidence in the financial system.

He further raised concerns about the fundamental assumption behind direct bank debits, questioning whether funds in an individual’s account always belong to that person. Yusuf explained that bank accounts often hold money belonging to third parties, such as clients, contractors, or suppliers, and treating all deposits as personal assets could lead to serious legal and ethical complications.

The economist warned that if these concerns remain unresolved, public trust in the tax reform agenda could weaken significantly. He added that fear-driven actions, such as holding cash at home or converting savings into foreign currencies, could undermine financial inclusion and destabilise the banking sector.

Yusuf insisted that enforcement measures of this nature should only be carried out with explicit court orders, stressing that judicial oversight is critical when dealing with sensitive financial rights.

Similarly, a former president of the Chartered Institute of Bankers of Nigeria, Mazi Okechukwu Unegbu, described the proposed approach as dangerous. He cautioned that allowing government agencies to debit accounts without watertight legal safeguards could create long-term instability in the financial system.

Unegbu questioned the legal foundation of the policy and warned that unchecked enforcement could damage the credibility of both Nigeria’s tax administration framework and its banking sector. He urged lawmakers and regulators to intervene, noting that revenue generation must not come at the expense of public confidence and financial stability.

The latest controversy adds to earlier disputes surrounding Nigeria’s new tax laws, including allegations that the gazetted version of the legislation was altered. As debates continue, experts agree that clarity, transparency, and strict adherence to due process will be essential to ensuring that tax reforms achieve their intended goals without unintended economic consequences.