Nigeria’s e-invoicing push tests SMEs’ readiness for tax automation

Nigeria’s tax system is moving faster than many of the businesses expected to comply with it.

From TaxPro Max to electronic invoicing through the Merchant Buyer Solution (MBS) and now Rev360, tax administration is becoming increasingly digital and automated, designed to capture transactions in real time, reduce leakages, and improve revenue collection. But for many small business owners, especially at the lower end of the market, tax compliance still begins with a notebook.

At a tyre-care business in Lagos, Avosegamu Nugboyun, operations manager, says the company only recently began keeping some records digitally, such as sales, customer details, and stock, after years of doing everything manually. “We used manual from day one,” he said.

“There’s a lot of talk, but nobody has a place where business owners can be held by hand and taught how to do it,” Nugboyun said. His frustration points to a wider complaint among small businesses: while tax administration is becoming more digital, practical guidance for navigating the system remains limited. For many SMEs, the challenge is not unwillingness to comply but knowing how to begin.

The company has not filed taxes digitally. Customer payments have shifted over time, but cash remains significant. “In the beginning, it was 90 percent cash and 10 percent transfer. Now transfers sometimes take the lead, but on average cash is still around 60 percent.” That gap between a tax system becoming increasingly automated and businesses still operating with partial or informal records may define the next phase of Nigeria’s tax reform.

Small and medium-sized enterprises account for 96 percent of businesses in Nigeria, contribute nearly half of GDP, and employ the majority of the country’s workforce, according to SMEDAN. Yet many remain lightly structured, with owner-led accounting, handwritten sales records, or no formal tax process at all.

Nigeria’s tax-to-GDP ratio remains among the lowest globally, hovering around 10 percent in recent years. To grow non-oil revenue, authorities are relying on technology to widen the tax net, improve visibility over transactions, and make compliance easier. But automation works best when businesses are already digitally visible. And many are only partly there.

A Lagos-based bookstore owner says digital compliance is now routine for the business. “We keep digital records. Every payment is filed digitally,” the owner said. “We used external accountants before, but now we handle tax in-house.” The business runs fully cashless and files taxes through the Lagos State Internal Revenue Service platform. “No issue most of the time.” That puts the company among the likely winners of Nigeria’s tax automation drive: structured SMEs with digital payment trails, invoices, accounting support, and existing filing systems.

For thousands of smaller entrepreneurs, the experience looks different. Misturah Ayoola, who sells fragrances, says most customers pay by transfer, but she still records sales manually. “I write it down,” she said. She does not currently calculate tax and has never filed digitally.

Aikomo Boluwatife, a thrift gymwear seller in Lagos, says her customers also pay almost entirely through transfer. But her business is not registered; she keeps no digital records and has never explored digital filing. These businesses are not outside the digital economy; many already receive payments electronically. What they often lack is the layer between payment and compliance: invoicing, structured bookkeeping, tax knowledge, or the capacity to hire accountants.

Tax professionals say this is where the next challenge lies. Gbenga Falana, a tax and fiscal governance expert, recently said Nigeria’s transition to e-invoicing is “more than a technological reform” and warned that success will depend not only on the software but on taxpayer education, institutional readiness, and how easy compliance feels for businesses.

That concern is increasingly relevant as Rev360 rolls out in phases and electronic invoicing expands.

For bigger and better-organised firms, automation could reduce filing time, simplify audits and make tax administration more predictable. Accounting software providers, fintechs, tax consultants and digital compliance firms also stand to benefit as demand grows for tools that help businesses stay visible to the system. The harder adjustment may fall on micro and informal operators, especially sole proprietors still using paper records, businesses without registration, and owners managing finance themselves. For many of them, the issue is less resistance than readiness. “How do I file?” “What records do I need to keep?” “Do I need an accountant?” Those questions remain unanswered for many small business owners already operating under economic pressure. That leaves Nigeria’s tax reform at an important point.

The infrastructure for digital taxation is increasingly in place. The platforms are live. The automation is advancing. The bigger test now is whether millions of small businesses can move with it. Because in Nigeria’s next tax phase, the question may no longer be whether the government can digitise tax collection. It is whether the country’s SMEs are prepared to be counted by it.