The Big Picture
Nigeria's tax landscape is experiencing its most dramatic transformation in years. While the country just recorded its highest-ever VAT collection of ₦6.72 trillion in 2024, the Federal Inland Revenue Service is simultaneously rolling out a game-changing digital platform that could reshape how businesses pay taxes forever.
It's a perfect storm of policy and performance , and the early numbers suggest Nigeria's revenue revolution is just getting started.
The Digital Tax Revolution Begins
The centerpiece of this transformation is Nigeria's new Electronic Fiscal System (EFS), which Ripples Nigeria reports went live on August 1, 2025, after a successful pilot that began last November. The system features an electronic invoicing solution called the Merchant-Buyer Model, giving tax authorities real-time visibility into commercial transactions.
The adoption rate has been impressive. According to Aljazirah Nigeria Newspaper, at least 1,000 companies , representing 20% of more than 5,000 eligible firms , have already integrated with the platform in just two weeks. MTN Nigeria became the first company to transmit live electronic invoices, while Huawei and IHS Nigeria have completed test transmissions and are going live soon.
The initial August 1 deadline has been extended to November 1, 2025, to accommodate companies facing operational constraints. The first phase targets large companies with annual turnover of ₦5 billion and above, with medium-sized businesses to follow.
Record VAT Collections Signal Strong Economic Activity
While the new digital system launches, Nigeria's existing tax machinery is already delivering unprecedented results. The National Bureau of Statistics data reported by Nigeria Communications Week shows VAT revenue surged to ₦6.72 trillion in 2024, marking an 84.6% increase from ₦3.64 trillion in 2023.
The growth was consistent throughout the year: Q1 collections stood at ₦1.43 trillion, rising to ₦1.56 trillion in Q2 (9.09% increase), then ₦1.78 trillion in Q3 (14% increase), and peaking at ₦1.95 trillion in Q4 (9.5% increase from Q3).
Several sectors posted remarkable quarter-on-quarter growth in Q4. Extraterritorial organisations saw a dramatic rise of 180.05%, followed by agriculture, forestry and fishing at 70.83%, and human health and social work at 46.13%. However, not all sectors thrived , households as employers contracted by 28.97%, while the information and communication sector declined by 23%.
Tougher Exit Rules Close Tax Loopholes
Nigeria's new tax legislation is also closing escape routes for businesses trying to avoid obligations. The Guardian Nigeria News reports that the Nigeria Tax Act 2025 now requires businesses to pay outstanding tax obligations even six months after liquidation.
Under Section 24, companies that cease operations must still handle tax obligations for income received post-liquidation. The law mandates businesses to notify tax authorities within one month of receiving any sum that should have been included in pre-cessation profits.
This extends Nigeria's tax reach beyond operational periods, potentially complicating exit strategies for business promoters looking to leave the economy with unpaid obligations.
Around the Tax World
• Aviation industry sounds alarm: Nigerian airlines are facing potential collapse under the new tax regime, with Dr. Allen Onyema of Air Peace warning that airlines "would die within 48 hours if implemented." The proposed taxes include customs duties on aircraft imports and 7.5% VAT on imported planes and ticket fares (Tribune Online).
• Digital divide concerns emerge: Tax experts are warning about Nigeria's digital divide between urban and rural populations, particularly among SMEs. Without proper support, rural businesses may be pushed further into the informal economy (The Guardian Nigeria News).
• Enforcement capacity questioned: Nigeria's limited audit capacity faces new challenges with increased digital compliance expectations, raising concerns about potential corruption without proper transparency oversight.
By the Numbers
Prime Revenue Stat: Domestic VAT payments contributed ₦917.40 billion to Q4 2024 collections , the largest single source, indicating robust local business activity and consumer spending.
Looking Ahead
All eyes are now on the November 1 deadline for remaining large taxpayers to integrate with the EFS platform. The phased rollout to medium-sized businesses will be the real test of whether Nigeria's digital tax revolution can maintain momentum while avoiding the pitfalls that have historically plagued major reforms.
The early success of both the VAT collections and digital platform adoption suggests Nigeria may have found the right formula for modernizing its tax system , but the aviation industry pushback and rural digital divide concerns show the road ahead won't be smooth for everyone.
Prepared by MyTax - mytax.com.ng