Daniel Otera
Nigeria’s ambitious electronic invoicing system represents more than just technological advancement; it could be the key to unlocking billions in untapped revenue for Africa’s most populous nation. As the Federal Inland Revenue Service (FIRS) implements its phased digital transformation, fresh data reveals the magnitude of what’s at stake.
Nigeria’s tax-to-GDP ratio at 10.8% as at 2021, is one of the lowest amongst countries of similar economic size, falling significantly below the International Monetary Fund’s recommended threshold of 12%. This gap becomes more stark when compared to regional neighbours, with general government revenue in Nigeria was 7.3 percent of GDP for 2021 less than half of the average in countries belonging to the Economic Community of West African States (ECOWAS) and nearly a third of the average of countries in Sub-Saharan Africa (SSA).
The scale of Nigeria’s revenue collection challenge is illustrated by recent performance data. The National Bureau of Statistics (NBS) said Nigeria’s Value Added Tax (VAT) collections rose to N1.95 trillion in the fourth quarter of 2024. This is a 9.23% increase from N1.78 trillion in the previous quarter, representing a 62% year-on-year surge. Whilst impressive, this growth highlights the potential that remains untapped through improved compliance mechanisms.
The FIRS e-invoicing mandate follows a carefully structured timeline designed to minimise disruption whilst maximising compliance. The Federal Inland Revenue Service (FIRS) has officially mandated e-invoicing via the Electronic Fiscal System (EFS) for large taxpayers, effective August 1, 2025, following a successful pilot phase that began in November 2024.
The phased approach targets Nigeria’s largest revenue generators first. Large taxpayers (Turnover above N5 billion) will commence on 1 August 2025. Non-resident will not become liable to report e-invoices until 1 January 2026. This strategic sequencing ensures that the system captures the highest-value transactions whilst allowing time for infrastructure development and compliance training.
The implementation of e-invoicing in Nigeria will follow a phased approach. From July 1, 2025, large taxpayers will enter a pilot phase where compliance systems are stress-tested and refined. By January 1, 2026, medium and small enterprises will also be required to adopt the mandate.
Initial compliance data suggests a measured but positive response from Nigeria’s corporate sector. According to official FIRS statements, approximately 1,000 companies representing 20% of the 5,000 eligible large taxpayers have commenced integration with the platform within the first two weeks of the system going live.
This 20% early adoption rate, whilst modest, reflects the complexity of system integration for major corporations. The three-month extension to November 2025 for full compliance indicates the practical challenges faced by large taxpayers in adapting existing financial systems to the new digital requirements.
MTN Nigeria’s position as the first company to transmit live electronic invoices establishes a precedent for other major corporations. The involvement of telecommunications giants like Huawei Nigeria and infrastructure companies such as IHS Nigeria in the testing phase suggests broad sectoral engagement with the digital transformation process.
The timing of Nigeria’s e-invoicing implementation coincides with mounting fiscal pressures. Government Revenues in Nigeria increased to 2519.82 NGN Billion in the fourth quarter of 2024 from 2282.54 NGN Billion in the third quarter of 2024, yet this growth occurs against a backdrop of expanding government expenditure and debt service obligations.
The electronic invoicing system addresses fundamental issues in Nigeria’s tax ecosystem. By providing real-time visibility into commercial transactions, the system promises to reduce the estimated N8 trillion annual tax gap funds that could significantly enhance the government’s capacity for infrastructure development and social services.
The collaboration with the National Information Technology Development Agency (NITDA) represents a crucial component of the e-invoicing ecosystem. Service providers functioning as both system integrators and access point providers ensure that smaller firms can participate effectively in the digital tax regime without requiring substantial independent technology investments.
B2B pre-clearance structured e-invoicing between businesses via the government. Businesses may use a variety of ‘Accesspoints’ to facilitate compliance, ensuring that the system remains accessible across different company sizes and technical capabilities.
Nigeria’s e-invoicing implementation places it amongst a growing number of African nations embracing digital tax solutions. Countries such as Rwanda, Kenya, and Ghana have demonstrated that electronic systems can substantially improve revenue collection whilst reducing compliance costs for businesses.
The success of Nigeria’s system could serve as a template for other West African Economic and Monetary Union (WAEMU) and ECOWAS nations seeking to modernise their tax administration systems. Given Nigeria’s position as Africa’s largest economy, the outcomes will likely influence regional approaches to digital tax transformation.
Key challenges to the mandate include infrastructure gaps, particularly for smaller enterprises that may lack sophisticated accounting systems. The FIRS has acknowledged these constraints through stakeholder engagement programmes including webinars, workshops, and town hall meetings designed to facilitate smooth transitions.
The extension of the compliance deadline from August to November 2025 reflects the practical realities of system integration for major corporations. This flexibility suggests a pragmatic approach to implementation that prioritises effective compliance over rigid adherence to initial timelines.
Whilst specific revenue projections remain confidential, international experience suggests that comprehensive e-invoicing systems typically increase tax compliance by 15-25% within the first three years of implementation. Applied to Nigeria’s current tax base, this could represent additional annual revenues of N2-3 trillion.
The system’s integration with the Nigeria Revenue Services Reform Act creates a unified framework for revenue reporting across different tax categories. This harmonisation could reduce administrative costs whilst improving the accuracy of government fiscal planning.
The success of e-invoicing could fundamentally alter Nigeria’s economic trajectory. Enhanced revenue collection capacity would provide government with greater fiscal space for infrastructure investment, potentially accelerating economic diversification away from oil dependence.
For businesses, the system promises reduced compliance costs through automated reporting mechanisms. The elimination of manual invoice processing could free up resources for productive investment whilst reducing opportunities for tax evasion.
The phased implementation approach, beginning with large taxpayers and expanding to medium and small enterprises, ensures that the system develops capacity gradually whilst capturing the majority of commercial value from the outset.
Nigeria’s e-invoicing transformation represents more than administrative reform it constitutes a fundamental shift towards digital governance that could serve as a model for emerging economies worldwide. The success of this initiative may well determine whether Nigeria can bridge its revenue gap and achieve sustainable fiscal health in the coming decade.