Businesses will need to upgrade their tax and accounting processes as Nigeria moves towards a digital tax administration system driven by electronic invoicing, the Nigeria Revenue Service has said.

The e-invoicing framework, which is being introduced through a phased rollout, is designed to improve transaction visibility, reduce revenue leakages and strengthen compliance by enabling tax authorities to access more accurate records of business activities.

Speaking at an e-invoicing compliance breakfast meeting for chief executives, chief financial officers, heads of tax and finance leaders in Lagos on Tuesday, the Project Manager of the National E-Invoicing Project at the Nigeria Revenue Service, Mohammed Bawa, said businesses must adapt to a changing commercial environment where more transactions are conducted electronically.

“Business environments are becoming very dynamic, which is making it difficult for tax administration bodies to determine what is taxable,” Bawa said. “There is a need to have visibility over all transactions that are being carried out across every sector of the economy.”

He said e-invoicing would help bridge the information gap between businesses and tax authorities by creating digital records of transactions, reducing opportunities for under-reporting of turnover, tax fraud and inaccurate tax declarations.

According to Bawa, the initiative aligns with a global movement towards digital tax administration, with countries including Kenya, Rwanda and Zambia already implementing similar systems.

“Many transactions today are being done electronically, making it difficult for tax administration bodies to have insight and visibility over these transactions,” he said. “The e-invoicing seeks to address that gap.”

The NRS official said the system would also standardise invoice formats across businesses and allow company accounting platforms to interact directly with government tax systems.

Director of DigiTax Nigeria, Olumide Akinsola, said the e-invoicing requirement is mandatory, but implementation would be carried out gradually to allow businesses to prepare for the transition.

He said the digital system would provide benefits for companies by improving audit trails, simplifying tax claims and reducing disputes with tax authorities.

“For businesses, your processes become easier, your claims are easier to prove, your refunds are easier to justify, and your audits are easier to do,” Akinsola said.

He, however, noted that invoices issued outside the approved e-invoicing framework may affect businesses’ ability to claim value-added tax credits.

The rollout will begin with large taxpayers with annual turnover of N5bn and above, followed by medium taxpayers with turnover between N1bn and N5bn, before extending to emerging businesses.

The Nigeria Revenue Service said the move represents a major step in Nigeria’s transition from electronic tax services to an automated tax ecosystem where businesses and government platforms can exchange information seamlessly.

The authority said the ultimate goal is to expand the tax base, improve transparency and support domestic revenue mobilisation.