In a significant stride towards modernizing its tax administration, Nigeria’s Federal Inland Revenue Service (FIRS) is set to launch a nationwide e-invoicing system. Scheduled to commence on July 25, 2025, this initiative aims to enhance tax compliance, improve data transparency, and reduce revenue leakages. The e-invoicing system, known as the Merchant Buyers’ Service Solution (FIRSMBS), will replace traditional paper invoices with structured digital invoices for all business transactions, encompassing Business-to-Business (B2B), Business-to-Government (B2G), and Business-to-Consumer (B2C) transactions.
This digital transformation aligns with Nigeria’s broader digital economy policy and strategy, emphasizing the need for efficient, transparent, and compliant tax administration. By leveraging technology, the FIRS aims to accurately monitor and evaluate taxable goods and services, thereby curbing customs fraud and enhancing the ease of doing business in Nigeria.
The FIRSMBS E-Invoicing System: Structure and Functionality
The FIRSMBS is designed to facilitate the real-time generation, validation, storage, and exchange of invoices. Each invoice will receive a unique Invoice Reference Number (IRN) and a cryptographic stamp, ensuring authenticity and enabling the FIRS to have real-time visibility into transactions.
Key Features:
- Real-Time Invoice Management: For B2B and B2G transactions, suppliers must submit invoices to the FIRS for clearance before providing them to buyers. Cleared invoices receive an IRN and cryptographic stamp marking them as authentic.
- Near-Real-Time Reporting: For B2C transactions, invoices must be reported to the FIRS within 24 hours of issuance.
- Structured Format Requirements: Invoices must be issued in a structured UBL/XML format, adhering to international standards.
- Technology and Integration: The system follows the four-corner model, involving the supplier, supplier’s access point, buyer’s access point, and buyer. Each party, once connected, can use an access point to send/receive invoices, enabled by an Access Point Provider (APP).
- Security Standards: The system adopts international security standards, such as ISO 27001, providing best practices for information security management and ensuring data security.
These features collectively aim to enhance the efficiency, transparency, and compliance of Nigeria’s tax administration.
Targeted Stakeholders and Phased Implementation
The pilot phase of the e-invoicing system is set to begin on July 25, 2025, targeting large taxpayers with an annual turnover of five billion Nigerian Naira (N5b) or more. These entities, including those in sectors such as oil and gas, banking, manufacturing, and services, will be required to issue all invoices through the platform.
Following the pilot phase, which is expected to run through December 2025, the program will be rolled out to medium and small taxpayers. This phased approach allows the FIRS to fine-tune the system and address any challenges before broader implementation.
Stakeholder engagement sessions have been held to sensitize stakeholders about the features and benefits of the system, providing a platform for dialogue, collaboration, and shared insights as the pilot rollout progresses.
Legal and Regulatory Framework
The e-invoicing mandate is grounded in Nigeria’s tax laws, particularly the Federal Inland Revenue Service (Establishment) Act, 2007, which empowers the FIRS to leverage technology to automate tax administration processes. Proposed amendments under Nigeria’s tax reform bills also reinforce these powers, requiring taxpayers to implement the “fiscalisation system” deployed by the FIRS, as well as to grant access for the deployment of this technology within 30 days of receiving the deployment notice.
The Nigerian Tax Administration Bill (NTAB) imposes penalties for noncompliance. Specifically, Section 103 of the NTAB imposes a penalty of N1m for the first day in which a taxpayer defaults in granting access to the FIRS for the deployment of the technology, as well as N10k for each subsequent day of noncompliance. Furthermore, Section 104 of the NTAB stipulates that failure to process taxable supplies through the fiscalisation system will lead to an administrative penalty of N200k plus 100% of the tax due, in addition to interest of 2% above the Central Bank of Nigeria monetary policy rate per annum. Noncompliant invoices also risk the loss of input-VAT credit.
Impact on Customs Fraud and Revenue Leakages
The introduction of the FIRSMBS e-invoicing system is expected to significantly reduce customs fraud and revenue leakages. By capturing transactional data directly from taxpayers, the system enhances transparency in tax administration. The real-time visibility into transactions allows the FIRS to detect discrepancies, prevent misclassification of goods, and ensure accurate tax assessments.
The structured digital invoices replace traditional paper invoices, standardizing invoice creation and exchange across both public and private sectors. This standardization makes it easier to identify and address fraudulent activities, thereby improving the overall integrity of the tax system.
Challenges and Considerations in Implementing E-Invoicing
While the FIRS e-invoicing pilot program holds the promise of transforming Nigeria’s tax administration, several challenges must be addressed:
- Technological Infrastructure and Readiness: Small and medium-sized enterprises (SMEs) may lack the necessary infrastructure to integrate with the e-invoicing system. Ensuring that these businesses have access to reliable internet connectivity, compatible accounting software, and trained personnel is crucial for successful implementation.
- Data Security and Privacy: Protecting sensitive financial data is paramount. The FIRS and businesses must implement robust cybersecurity measures to safeguard against data breaches and unauthorized access.
- Change Management and Training: Transitioning from traditional invoicing methods to a digital system requires a cultural shift within organizations. Employees need to be trained on the new processes, and change management strategies must be implemented to address resistance and ensure a smooth transition.
- Legal and Regulatory Framework: Clear guidelines and policies must be established to govern the use of electronic invoices, address disputes, and enforce compliance. The FIRS is working on aligning the e-invoicing initiative with existing tax laws and proposing necessary amendments to support its implementation.
- Integration with Existing Systems: Businesses may face challenges integrating the e-invoicing system with their existing accounting and enterprise resource planning (ERP) systems. Ensuring compatibility and seamless data exchange between systems is critical to avoid disruptions in operations.
- Cost Implications: Implementing a new invoicing system entails costs related to software acquisition, infrastructure upgrades, and employee training. For some businesses, particularly SMEs, these expenses could be burdensome. The government may need to consider providing financial assistance or incentives to support these businesses during the transition.
- Ensuring Compliance and Enforcement: Monitoring compliance and enforcing the use of the e-invoicing system across all sectors is a significant undertaking. The FIRS must establish mechanisms to detect non-compliance and apply appropriate penalties. Additionally, continuous monitoring and evaluation of the system’s performance will be necessary to make improvements and address emerging challenges.
Preparing for the FIRS E-Invoicing Rollout: What Businesses Need to Know
As Nigeria’s Federal Inland Revenue Service (FIRS) gears up to launch the e-invoicing pilot on July 25, 2025, businesses—particularly large taxpayers—must take proactive steps to ensure compliance and capitalize on the benefits of this digital transformation.
1. Understanding the E-Invoicing System
The e-invoicing system, known as the Merchant Buyers’ Service Solution (FIRSMBS), replaces traditional paper invoices with structured digital invoices. This system aims to standardize invoice creation and exchange across both public and private sectors, enhancing tax compliance and reducing revenue leakages. Invoices must be issued in a structured UBL/XML format, adhering to international standards, and transmitted via licensed Access Point Providers (APPs).
2. Registration and Integration
Businesses are required to register on the FIRS MBS portal and choose an accredited APP for system integration. This integration will enable the electronic creation, validation, and storage of invoices, credit notes, and debit notes. It’s crucial to assess current invoicing systems and determine the necessary adjustments to align with the new requirements.
3. Training and Capacity Building
To facilitate a smooth transition, businesses should invest in training for their finance and IT teams. Understanding the new invoicing processes and the technical aspects of the system will be vital for effective implementation. The FIRS has commenced stakeholder engagements to provide guidance and address concerns, ensuring that businesses are well-prepared for the rollout.
4. Compliance and Penalties
Non-compliance with the e-invoicing requirements can result in significant penalties. The Nigerian Tax Administration Bill stipulates an administrative penalty of N200,000 plus 100% of the tax due, in addition to interest of 2% above the Central Bank of Nigeria monetary policy rate per annum. Therefore, adhering to the new system is not just beneficial but legally imperative.
5. Monitoring and Feedback
Active participation in the pilot phase will provide valuable insights into the system’s functionality and its impact on business operations.
Businesses should monitor the system’s performance and provide feedback to the FIRS to contribute to continuous improvement and ensure that the system meets the needs of all stakeholders
