Nigeria’s Pre-Clearance E-Invoicing Mandate

Nigeria is accelerating its digital tax administration reforms with the Federal Inland Revenue Service (FIRS) appointed as the national Peppol Authority. This is a decisive step, positioning the widely adopted Pan-European Public Procurement Online (Peppol) framework as the foundational standard for structured e-invoicing across the country. The move aligns Nigeria with emerging global trends in Continuous Transaction Controls (CTCs), enhancing both interoperability for businesses and real-time oversight for the tax authority.

The initial momentum faced a minor technical adjustment. On 11 August, FIRS postponed the initial 1 August 2025 registration deadline for mandatory e-invoicing to 1 November 2025 for large taxpayers (those with annual turnover exceeding ₦5 billion). This three-month extension followed acknowledged technical challenges during onboarding to the new Merchant Buyers’ Service Solution (FIRSMBS) network and constraints in vendor readiness, demonstrating a pragmatic approach to a complex system rollout.

While non-resident suppliers are currently excluded from the obligation, FIRS is expected to revisit and potentially expand the scope to include them in 2026, a critical consideration for multinational enterprises operating in Nigeria.

Scope of the Mandate

The regulatory framework introduces a bifurcated compliance model, reflecting a global standard for distinguishing between business and consumer transactions:

B2B Transactions: The Pre-Clearance Model

• Mandatory pre-clearance structured e-invoicing is routed through government-approved Access Points (APs).

• The system operates a "Four-Corner Model" leveraging the Peppol structure for secure and standardized data exchange.

• Validation is critical: Each invoice must be validated and digitally signed by FIRS before it can be legally issued to the customer, granting the FIRS real-time visibility and control over transactions.

B2C Transactions: The Post-Reporting Model

• Reporting obligations will require e-submission within 24 hours of issuance (pending final confirmation).

• FIRS will return a Cryptographic Stamp Identifier (CSID) and a QR code to be included on consumer receipts. This QR code allows customers to easily validate the transaction against the tax authority’s system, a powerful tool against tax evasion. The B2C mandate initially applies to transactions exceeding a threshold of ₦50,000.

Phased Implementation and Integration Requirements

The rollout is deliberately phased to allow businesses time for system adjustments:

• November 2024 – June 2025: Voluntary pilot programme.

• 1 November 2025:Go-live for large taxpayers following a revised integration window.

• January 2026: Expected rollout to remaining medium and small taxpayers.

FIRSMBS Network and Interoperability

The FIRSMBS network, administered by the National Information Technology Development Agency (NITDA), offers two key integration pathways:

1. Direct Use: Leveraging the free FIRSMBS invoice creation platform.

2. System Integration: Integrating existing ERP, accounting, e-commerce, or billing solutions via RESTful API.

Nigeria's adoption of the BIS Billing 3.0 UBL (Universal Business Language) standard is central to the project. This internationally recognized XML/JSON-based format ensures seamless interoperability and supports automated processing across diverse commercial platforms, significantly reducing data entry errors.

Invoice Security and Integrity

Every successful B2B pre-cleared invoice is assigned a unique Invoice Reference Number (IRN) and a Cryptographic Stamp Identifier (CSID). This dual identifier ensures:

• Traceability and authenticity.

• Defence against tampering.

A corresponding QR code must be present in physical or PDF formats. The buyer is given a 72-hour window to dispute or reject the submitted e-invoice, a mechanism that helps to ensure transactional data accuracy from both sides.

Key Implementation Features

Pre-Clearance Mechanism

• Real-time invoice validation before transaction completion

• Automated tax calculation and verification

• Enhanced compliance monitoring capabilities

• Reduced processing delays for legitimate transactions

Peppol Integration Benefits

• Standardized invoice formats across international borders

• Improved interoperability with global trading partners

• Enhanced data security and transmission protocols

• Streamlined B2B and B2G transaction processes

Policy Context and Revenue Imperatives

These reforms are not only administrative; they are a critical component of Nigeria’s overarching fiscal strategy, which aims to:

• Expand the VAT base and reduce leakages.

• Enhance data visibility and improve audit efficiency.

FIRS is targeting a substantial 57% increase in tax revenue collection, projecting ₦19.4 trillion for 2024. A 2023 governmental review identified e-invoicing as an essential lever to potentially double VAT revenues.

Automated Tax Administration System (ATAS)

The legislative foundation for this digital control is Sections 25 and 26 of the FIRS Establishment Act, which enabled the deployment of the Automated Tax Administration System (ATAS), effective 30 April 2021.

ATAS grants FIRS extensive powers for automated tax functions, including:

• Automated audits and investigations.

• Real-time access to accounting data, extending to cloud-hosted services and outsourced providers.

Taxpayers are entitled to 30 days’ notice before system access is activated. Critically, refusal to grant system access attracts stiff penalties:

• ₦25,000 for the first month.

• ₦10,000 for each subsequent month of non-compliance.

• A major, newly introduced penalty for failure to process taxable supplies through the system is an administrative penalty of ₦200,000 plus 100% of the tax due, in addition to interest.

Conclusion and Strategic Considerations

Nigeria’s adoption of Peppol-based pre-clearance e-invoicing is a significant and modernizing step toward a digitally integrated VAT ecosystem. The extension of the deadline for large taxpayers provides a valuable, yet limited, window for preparation.

Taxpayers should treat this as a high-priority compliance and system integration project. The focus should be on:

1. System Upgrades: Ensuring ERP and accounting systems can handle the UBL 3.0 format and API-based communication.

2. Vendor Assessments: Choosing a NITDA-accredited Access Point Provider (APP) that offers robust security (e.g., AES-256 encryption, TLS 1.3) and integration expertise.

3. Data Governance: Establishing rigorous internal controls over invoice data quality and submission processes to avoid validation failures and penalties.

Further clarity is anticipated from FIRS regarding the final operational requirements for B2C reporting and the definitive timeline for the inclusion of non-resident suppliers in 2026. This mandate is a signal that the era of paper and unstructured electronic invoicing is rapidly ending in Nigeria.

Source: FIRS