Nigeria’s E-Invoicing Revolution: Legislative Framework, Implementation, and Implications

Nigeria’s e-invoicing mandate represents one of the most significant reforms in its tax administration history, driven by legislative authority and technological modernization. As the Federal Inland Revenue Service (FIRS) prepares to launch its phased e-invoicing system in July 2025, businesses and service providers must navigate a complex regulatory landscape. This article examines the legislative foundations, technical requirements, compliance obligations, and broader implications of Nigeria’s e-invoicing framework, providing a comprehensive guide for stakeholders.

Legislative Foundations of E-Invoicing in Nigeria

1. FIRS Establishment Act (2007)

The Federal Inland Revenue Service (Establishment) Act, 2007 serves as the primary legislative basis for Nigeria’s e-invoicing mandate. Key provisions include:

• Section 25: Grants FIRS authority to "administer all laws relating to taxation" and implement systems for efficient tax collection. This clause empowers FIRS to mandate digital invoicing and real-time transaction reporting.
• Section 26: Authorizes FIRS to "deploy technology to automate tax administration processes," including assessments, filings, and audits. This provision enabled the creation of the Merchant Buyers’ Service Solution (FIRSMBS), the central e-invoicing platform.

These sections provide FIRS with the legal mandate to enforce compliance, issue penalties, and standardize invoicing formats across all VAT-registered entities.

2. National Information Technology Development Act (2007)

Complementing FIRS’s tax authority, the NITDA Act establishes technical standards for IT systems. Relevant provisions include:

• Section 6(1): Requires NITDA to develop frameworks for IT systems interoperability, ensuring seamless data exchange between businesses and government platforms.
• Section 17: Mandates accreditation of technology service providers, including system integrators and Access Point Providers (APPs).

NITDA’s Regulatory Guidelines for Electronic Invoicing (2024) operationalize these powers by defining data formatting standards (BIS Billing 3.0 UBL schema), cybersecurity protocols for invoice transmission and certification criteria for service providers.

Operational Framework and Technical Requirements from FIRS

1. Scope of the E-Invoicing Mandate in Nigeria

The e-invoicing system applies to all VAT-registered entities conducting Business-to-Business (B2B) transactions, Business-to-Government (B2G) procurements and Business-to-Consumer (B2C) sales exceeding 50,000 Naira.

2. Transaction-Type-Specific E-Invoice Processes

a. B2B/B2G Transactions

For B2B and B2G transactions, a pre-clearance model will be introduced. Suppliers must submit invoices to FIRSMBS for validation before sharing them with buyers. FIRS issues an Invoice Reference Number (IRN) and Cryptographic Stamp Identifier (CSID) within 2-4 hours, and validated invoices are then exchanged via accredited Access Points. All cleared invoices must contain a QR code for buyer validation.

b. B2C Transactions

For B2C transactions that meet the monetary threshold, a reporting model has been specific, requiring taxpayers to report transactions to FIRSMBS in near-real time, with 24-hours of issuance. 

3. Technical Specifications of the Electronic Invoice System

a. Data Formatting

Nigeria adopted the BIS Billing 3.0 Universal Business Language (UBL) schema, which mandates, 55 Mandatory Fields across eight categories and provides support for XML or JSON formats for API integrations.

b. API Integration

Businesses and/or service providers must integrate with FIRSMBS via RESTful APIs to submit invoices for validation, report B2C transactional data, retrieve IRN/CSID statuses, and handle rejection codes for errors. The API authentication requires digital certificates issued by FIRS.

c. Security Protocols

NITDA has mandate encryption standards such as AES-256 for data at rest, and TLS 1.3 for data in transit. For access controls, role-based permissions must align with ISO 27001 standards.

Compliance and Accreditation for Mandatory E-invoicing

1. NITDA Accreditation for Service Providers

The NITDA Act mandates accreditation for System Integrators (Firms assisting businesses with ERP integration) and Access Point Providers (APPs) (Entities facilitating invoice transmission) before they may provide Nigerian taxpayer's with e-invoicing and e-reporting services.

There are multiple accreditation requirements, including technical competence, certifications such ISO/IEC 27001 and Peppol Authority accreditation for cross-border transactions, and Financial Capacity to ensure business continuity. 

2. Business Compliance Obligations

Taxpayers, or their service providers, are required to store e-invoices for 24 months with specific rules, as well as maintain audit trails regarding user access and data modification attempts.

3. Penalties for Non-Compliance with E-Invoicing Rules

There are a number of penalties for non-compliance with the upcoming mandate. For late reporting of B2C transactional data, a fine of 50,000 Naira per day will be levied. The authorities will reject input VAT claims for non-compliant B2B/B2G invoices. Finally, non-compliant service providers can have their accreditation revoked, which is monitored through regular NITDA audits.

Implementation Phases and Challenges

1. Phased Rollout (2025–2026)

The Nigerian authorities are implementing a phased rollout of requirements. From 1 July 2025, there will be a pilot phase for large taxpayers, with the mandate being extended to medium and small enterprises from 1 January 2026.

2. Key Challenges

Key challenges to the mandate include infrastructure gaps, such as limited internet penetration in rural areas, which complicates real-time reporting, and potential ERP system upgrades. There is also likely going to be resistance to change. 68% of SMEs surveyed in Lagos (2024) lacked awareness of e-invoicing requirements, but FIRS has conducted stakeholder workshops to address concerns. Finally, cross-border complexity will pose further challenges. However, Nigeria's adoption of Peppol standards and the resulting requirements for service providers will greatly assist cross-border interoperability.

Future Outlook and Global Context

1. Integration with AfCFTA

Nigeria’s e-invoicing framework aligns with the African Continental Free Trade Area (AfCFTA) digital trade protocols, potentially enabling standardized data exchange across 54 African nations. There is also the possibility of automated VAT refunds for cross-border transactions.

2. AI and Blockchain Innovations

FIRS may also consider integrating AI-powered fraud detection, a powerful tool in analyzing invoice patterns to identify evasion and fraud. Blockchain validation and security is also a logical possibility in future.

Conclusion on E-Invoicing Rules

Nigeria’s e-invoicing mandate, rooted in the FIRS and NITDA Acts, represents a transformative leap in tax administration. While the phased rollout allows businesses to adapt gradually, compliance requires significant investments in technology and training. Success hinges on collaboration between FIRS, NITDA, and the private sector to address infrastructure gaps and build stakeholder confidence.

For businesses, early adoption of FIRSMBS-compliant systems and partnerships with accredited providers will be critical to avoiding penalties and leveraging efficiency gains. As Nigeria positions itself as a digital tax leader in Africa, its e-invoicing framework offers a model for balancing fiscal transparency with economic growth for the developing continent.

Should you have any needs or concerns, feel free to reach out to eezi, powered by VATIT, as we will have a compliant solution for your e-invoicing and e-reporting requirements in Nigeria in time for the upcoming mandate.