Nigerian businesses are spending more to comply with the country’s digital tax reforms as the shift from periodic tax filing to real-time electronic reporting forces companies to invest in new software, systems integration, and staff training.
While the reforms are expected to improve transparency, reduce tax leakages, and strengthen revenue collection, tax professionals say the transition is creating a new compliance burden, particularly for businesses that are yet to digitise their operations.
“I believe digital tax compliance has improved transparency and efficiency, but it has also increased compliance costs for many Nigerian businesses, especially SMEs,” said Yvonne Afolabi, a principal consultant at Techpoint Finance Consults.
According to Afolabi, businesses are investing in accounting software, enterprise resource planning (ERP) systems, e-invoicing integration, staff training, tax advisory services, and stronger internal controls to comply with the new framework.
For many years, businesses relied largely on manual processes to prepare invoices and file tax returns before the introduction of TaxPro Max, which digitised tax filing. The latest phase of reform goes further. Through Rev360 and the electronic invoicing framework, invoices are transmitted electronically through accredited providers and validated by the Nigeria Revenue Service (NRS), giving the tax authority near real-time visibility into commercial transactions.
The NRS says the digital transition is designed to modernise tax administration, improve audit trails, and close revenue leakages as Nigeria seeks to raise its tax-to-GDP ratio and improve non-oil revenue mobilisation.
The approach is not unique to Nigeria. Kenya’s Tax Invoice Management System (TIMS), introduced in phases between 2021 and 2023, offers one of the clearest examples of what the government hopes to achieve.
After electronic invoicing became mandatory, monthly domestic VAT collections reportedly increased from about Sh20 billion to between Sh28 billion and Sh30 billion, representing a 40 to 50 percent increase. Annual VAT collections for the 2023/24 financial year reached Sh314.2 billion, exceeding government targets by 15.3 percent.
For Nigeria, the expectation is that similar reforms could strengthen revenue collection while making tax administration more transparent. For businesses, however, the transition comes with significant implementation costs.
Afolabi estimates first-year compliance costs could range from between N2 million and N10 million for small businesses, N10 million to N50 million for medium-sized businesses, and more than N100 million for large organisations implementing enterprise-wide digital tax systems.
Integration with the e-invoicing platform adds another layer of expenditure. Depending on existing systems and transaction volumes, businesses could spend between N500,000 and N5 million on integration, while implementation involving multiple systems may exceed N100 million for large organisations.
She explained that businesses often underestimate hidden costs, including consultancy fees, cybersecurity upgrades, internal audit requirements, regulatory updates, business process redesign, and productivity losses during implementation.
Companies that have already completed the transition say the investment extends beyond meeting regulatory obligations.
Dapo Adeyemi, applications manager for ERP at Evacare Health, said the company completed its integration before enforcement began and now transmits invoices automatically to the NRS for validation.
“Our invoices generated on the ERP system are transmitted to the NRS, and we receive feedback showing whether each invoice has been validated and signed,” he said.
Adeyemi said one of the biggest implementation challenges has been validating customers’ tax identification numbers as businesses migrate to the new tax ID system. Where customer details do not match NRS records, invoices are rejected and must be corrected before they can be processed.
Despite the initial challenges, he said the transition has simplified tax administration.
“It makes claiming input VAT easier because the tax authority already has visibility over our transactions. Everything becomes more transparent and easier to reconcile.”
For Nkechi Echeta, a business growth, investment, and restructuring lawyer, businesses should see the reforms as more than another compliance deadline.
“Compliance is not just about avoiding penalties,” she said. “It is a strategic business decision that builds credibility with investors and regulators while creating the financial room for businesses to grow.”
Technology providers also argue that the benefits extend beyond compliance.
Speaking during DigiTax’s E-Invoicing Compliance Breakfast in Lagos, Olumide Akinsola, the company’s country director, said businesses should approach electronic invoicing as a business transformation rather than merely another tax obligation.
“When I speak to people, I try not to make this a compliance thing as much as a business benefit thing,” Akinsola said. “Compliance brings fear. We focus on the business benefits because once companies understand those benefits, adoption becomes much easier.”
According to him, businesses that implement e-invoicing early stand to benefit from stronger audit trails, faster invoice processing, improved reconciliation, and better operational efficiency, while delayed adoption could create implementation bottlenecks as more organisations join the platform.
As Nigeria accelerates its transition to real-time tax administration, the experience of countries such as Kenya suggests the reforms could deliver stronger revenue collection and improve tax compliance. For businesses, however, the immediate challenge will be balancing the cost of digital transformation with the long-term benefits of operating in an increasingly data-driven tax environment.