Why thousands of Nigerian large firms risk sanctions

Thousands of large companies in Nigeria risk regulatory sanctions if they fail to connect their billing systems to the government’s electronic invoicing platform before the end of June, as authorities intensify efforts to modernise tax administration and improve transparency.

The initiative, led by the National Revenue Service, requires businesses to generate and transmit invoices digitally in real time—or near real time—at the point of issuance. Each invoice is authenticated on the platform, creating a verifiable digital trail that enables tax officials to monitor transactions, validate sales, and reconcile them with tax filings.

Speaking during a webinar organised by Stransact and Doftwerks West Africa Limited, Mohammed Bawa, head of product management at the NRS, warned that companies that miss the June deadline will be classified as defaulters under the rollout plan.

“The NRS will have the mandate to apply sanctions for non-compliance,” he said, while noting that timelines could still be adjusted depending on implementation challenges.

The deadline marks a critical compliance milestone for firms with annual turnover above N5 billion. These companies are expected to complete system integration and begin transmitting invoices under the new framework—a shift that could fundamentally change how businesses record sales, file taxes, and manage accounting processes.

Before the introduction of the Merchant Buyer Solution (MBS), companies relied on self-reporting through the Tax Pro Max platform, where invoices were not verified at the point of issuance. Underreporting was typically detected only during periodic audits conducted months later.

The new system adds a real-time verification layer to existing processes, moving compliance away from delayed reconciliation toward continuous monitoring. Authorities say this marks a broader transition from self-declared filings to data-driven tax enforcement.

Currently, about 5,000 large taxpayers fall within the first phase of the rollout. Early adoption has been gradual, with roughly 1,000 firms—around 20 percent—already connected to the system. Notable adopters include MTN Nigeria, IHS Towers, and Huawei Nigeria.

While the initial phase targets large corporations, the government plans to extend the system across other segments. Medium-sized firms with turnover between N1 billion and N5 billion are currently in the engagement phase, with pilot testing expected in the second quarter of 2026. Full implementation for this group is scheduled for July 1, 2026, with enforcement beginning in January 2027.

Smaller businesses will be given a longer transition timeline, with rollout expected from 2027 and enforcement commencing in 2028.

Nigeria’s push toward e-invoicing reflects a wider global trend, where tax systems are increasingly built around structured digital data rather than manual reporting. In regions such as Europe and Latin America, invoices are transmitted in machine-readable formats and often require approval from tax authorities before transactions are finalised.

Experts say the reform could significantly boost transparency, reduce revenue leakages, and align Nigeria with international best practices. However, concerns remain around compliance costs, system readiness, and data security.

“Efficiency is the obvious benefit, but the deeper value lies in assurance,” said Oluyemisi Daramola of Bamidele Daramola & Co, noting that continuous validation can strengthen governance and investor confidence.

Business leaders have also raised questions about increased regulatory visibility and the potential risks associated with real-time reporting. Eben Joels of Stransact highlighted concerns around data privacy and the extent of oversight authorities may gain.

Regulators, however, insist the system will reduce friction between businesses and tax authorities by ensuring both parties work from the same verified data, limiting disputes and the need for intrusive audits.

As the June deadline approaches, the success of the rollout will depend on how effectively authorities balance enforcement with support, ensuring businesses can transition smoothly into Nigeria’s evolving, data-driven tax regime.