Electronic Fiscal
System in Nigeria:
A Game Changer
June 2025
Introduction
In November 2024, the Federal Inland Revenue but may be delayed if the President has not
Service (FIRS) announced the planned adoption assented to the Tax Reform Bills by then. Roll-
of the Merchant Buyer Solution (MBS) also out will begin with large taxpayers, focusing
called the e-invoicing initiative for enhanced on B2B and B2G transactions, and thereafter,
tax administration and tax collection. This is a B2C transactions. This phased approach allows
national initiative involving various government for careful monitoring and troubleshooting of
agencies, such as the Nigeria Customs Service taxpayer’s system before it is expanded to the
(NCS), Central Bank of Nigeria (CBN), National broader consumer base.
Information Technology Development Agency
(NITDA), etc., but is primarily driven by the FIRS. A typical e-invoice will include eighty (80) fields
Electronic invoicing is simply a process of sending (both mandatory and optional fields), some of
and receiving invoices electronically rather than which are already present in taxpayers’ Enterprise
through paper-based methods. Resource Planning (ERP) systems and existing
e-invoicing solutions. The remaining fields would
Nigeria will be adopting the clearance and need to be configured by a System Integrator (SI).
reporting model of e-invoicing in line with The SI guarantees data compatibility in line with
the Pan-European Public Procurement Online Universal Business Language (UBL) and facilitates
(PEPPOL) framework. This model of e-invoicing accurate transmission of invoices to the Access
is used for Business-to-Business (B2B) and Point Provider (APP). The APP, on the other hand,
Business-to-Government (B2G) transactions. The validates and securely transmits invoices from
clearance model facilitates seamless creation, the client’s invoicing solution to the FIRS’s MBS
validation, and exchange of electronic invoices solution. Taxpayers have the flexibility to choose
between transacting parties. Under this model, from a list of licensed APPs and SIs for support in
each invoice generated by taxpayers must transmitting e-invoices between trading partners
include an invoice reference number (IRN), Quick and the FIRS. They also have the option to
Response (QR) code, and a digital signature to become SIs or APPs themselves, provided they
be considered valid for payment. The e-invoicing meet the necessary requirements. Please see the
system automatically generates the IRN. For link to the requirements.
Business-to-Consumer transactions (B2C), FIRS
is likely to adopt a simplified invoice/fiscalisation The FIRS has conducted several stakeholders’
method that will involve real-time or near real- engagement sessions, including sector-specific
time transmission of transaction data. E-Invoices sessions to educate stakeholders and encourage
can be issued and processed in all currencies. their active participation in e-invoicing.
The FIRS is currently pilot testing this initiative
with selected large taxpayers. Full-scale
deployment is expected to begin in July 2025
© 2024 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a
private English company limited by guarantee. All rights reserved.
Legal basis
Section 25 (3-4) of the Federal Inland Revenue Service an Electronic Fiscal System (EFS), any person making
(Establishment) Act (FIRSEA) 2007, as amended, provides a taxable supply shall use the EFS for recording and
that “The Service may deploy any proprietary or reporting all supplies…”
third-party payment, processing or other digital
Furthermore, Section 157 (1-2) of the harmonised
platform or application to collect and remit taxes due
Nigeria Tax Bill states that “a taxable person making
on international transactions in the supply of digital
a taxable supply shall implement the fiscalisation
services to and from a person in Nigeria, in the case
system deployed by the Service in accordance with
of transactions carried out through remote, digital,
the Nigeria Tax Administration Bill. The fiscalisation
electronic or other such platform. The Service may
system may include fiscal equipment consisting
deploy proprietary technology to automate the tax
of electronic devices, software solutions or a
administration process including tax assessment
communication system involving a secured network,
and information gathering provided it gives 30 days’
or any such combination of the components for
notice to the taxpayer.”
electronic invoicing and data transfer as the Service
Section 23 of the harmonised Nigeria Tax Administration may prescribe or deploy”.
Bill (NTAB) provides that “where the Service deploys
Consequences for non-compliance
In accordance with the powers granted to the FIRS as taxable supply through the fiscalisation system is liable
shown in the legislation above, taxpayers are mandated to an administrative penalty of N200,000 plus 100%
by the FIRS to integrate their systems with the FIRS’s of the tax due, plus an interest at the prevailing CBN’s
platform using Application Programming Interfaces Monetary Policy rate per annum.
(APIs). Failure to grant access for the deployment of
Additionally, without an IRN, taxpayers may be unable to
technology after 30 days of receipt of the deployment
claim VAT credit on invoices presented. This requirement
notice will attract an administrative penalty of ₦25,000
will also be considered as transaction validation for
for each day that it fails to grant access, according
allowable deduction for Companies Income Tax (CIT)
to the provision of Section 4(b) of the FIRSEA and
purposes and capital allowance claim. The invoice would
₦1,000,000.00 for the first day of default and ₦10,000
be unrecognised for payment by the customer who
for each subsequent day of default, according to Section
receives it through an APP.
103 of the proposed NTAB. Section 104 of NTAB also
provides that a taxable person who fails to process a
Commentaries
The e-invoicing initiative by the FIRS is another milestone and real-time monitoring. In addition, the initiative
toward the Federal Government’s commitment to supports decision making through advanced analytics
widening the tax net and enhancing government’s tax of data collected, enhances tax compliance predictively,
revenues. With the introduction of this initiative for tax and promotes a risk-based approach to tax audits/
purposes, Nigeria joins other progressive tax jurisdictions investigations. This, in turn, could broaden the tax base
like India, Kenya, Mexico, Chile, Italy, Denmark, etc. There by capturing a wider range of transactions and entities
are also many African countries that are implementing within the fiscal framework.
e-invoice.
There are also benefits for taxpayers. Taxpayers can
If properly implemented, this initiative has the potential benefit from cost savings due to reduction in the use
to enhance transparency in tax audit processes as it of paper, printing, and mailing costs. It enables faster
provides an auditable trail of invoice transactions. It can processing of payment and helps to increase efficiency
significantly lower compliance costs as disputes may be by reducing errors and processing time associated with
reduced due to the use of technology which allows for manual processes.
accurate data tracking, efficient reconciliation processes,
© 2025 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a
private English company limited by guarantee. All rights reserved.
However, to support a successful implementation of the initiative, government needs to address the
following concerns that taxpayers have expressed:
Quality of supporting infrastructure Data privacy and security – Considering
01 – Reliable internet connectivity and data 02 that the invoices that will be exchanged
storage capacity are key for the effective digitally will contain sensitive financial
implementation of e-invoicing. The data, data security is paramount. There are
transmission of invoices between the provisions in the current and proposed tax
ERP systems and FIRS’s portal requires laws in Nigeria that prescribe penalties for
internet speeds of upwards of 1 Mbps1 and any official of the tax authority who divulges
data storage capacity would have to be in any submission by taxpayers. Also, the
multiples of petabytes. In response to this Nigerian Data Protection law provides rules
challenge, we understand that the FIRS and regulations for the collection, storage
will upgrade its current internet access and and processing of data in Nigeria. However,
allow offline invoice processing capabilities these laws require the demonstration
so that taxpayers can still issue invoices of deliberate action from the regulator
during internet downtime and upload these to protect this information, including the
invoices when internet service becomes implementation of a multilayered approach
available. The data will be stored on local of technical, organisational and regulatory
servers. In some other jurisdictions, it is measures. Internal data polices will have
common for the regulators to use dedicated to be updated properly to manage all risks
data farms to store the data and information associated with this initiative, and the
collected via electronic invoicing. policies can be published for a high level of
transparency.
Cost of compliance for taxpayers – Challenges for small businesses –
03 Taxpayers would have to contend with the 04 E-invoicing can be capital intensive and
added cost of compliance associated with may be difficult for small businesses to
the acquisition of innovative technology implement. To ensure that small businesses
where necessary, and to engage the can participate in this initiative, we
services of SIs and APPs for the initiative. understand that the FIRS intends to create
This added cost would affect the profitability an e-invoicing solution that is accessible
of taxpayers. The FIRS could consider and practical for small businesses to use.
some form of incentives for taxpayers, for In line with our comments in point 3,
instance, granting an investment cost uplift this solution should be cost-effective for
for companies that adopt the initiative within small businesses to promote widespread
the 30-day window stipulated in Section 25 voluntary compliance.
(4) of the FIRSEA.
Megabits per second
1
© 2025 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a
private English company limited by guarantee. All rights reserved.
It is important for taxpayers to recognise that the e-invoicing initiative will become a significant part of tax
administration in Nigeria, offering more than just compliance with regulatory requirements. Benefits such as the
ability to claim input VAT, improved accuracy in invoice processing, faster payment processing and enhanced security
would collectively enhance taxpayers’ financial operations. Given these advantages, it is imperative for taxpayers to
proactively prepare for the integration. To ensure a smooth transition, taxpayers should do the following:
Conduct a comprehensive readiness assessment by evaluating:
i. existing technology infrastructure, including internet infrastructure, accounting/enterprise
01 solutions, etc.
ii. tax accounting system to ensure they can support the new e-invoicing requirements.
iii. tax configurations to ensure accurate mapping of goods using Harmonised System of
Nomenclature (HSN) codes
Invest in e-invoicing systems – Taxpayers without an e-invoicing system in place should
02 consider investing in one. It is important that taxpayers choose a system that aligns with their
business needs and is compliant with the FIRS’s e-invoicing standards and data protection
regulations.
03 Carefully assess and appoint APPs and SIs who can ensure secured and efficient integration
of the e-invoicing system with the FIRS platform. This step is critical for maintaining data
integrity and security.
04 Enhance cybersecurity measures to protect the system against cyber threats and
unauthorised access.
Sensitise and train key stakeholders about the e-invoicing process and its implications.
05 Training should cover operational changes, system usage, and compliance requirements to
ensure all relevant personnel are well-prepared.
06 Stay informed about the specific provisions and requirements of the e-invoicing initiative to
ensure compliance and avoid penalties.
Taxpayers need to be fully prepared ahead of the complete rollout of the e-invoicing initiative. Doing this would
minimise business disruptions and ensure full compliance with the new system.
KPMG is ready to help you to navigate the complexities of e-invoicing and ensure compliance with the relevant laws
and regulations.
For further enquiries, please contact:
home.kpmg/ng
home.kpmg/socialmedia
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to
provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in
the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2025 KPMG Advisory Services, a partnership registered in Nigeria and a member firm of the KPMG global organisation of independent member firms affiliated with
KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the
independent member firms of the KPMG global organisation.
