In Abuja last week, Finance Minister Taiwo Oyedele addressed the Chartered Institute of Taxation of Nigeria's 28th Annual Tax Conference, highlighting the global push for tax system modernization driven by changing supply chains. His policy-level remarks, however, have profound implications for Nigerian manufacturers facing the July e-invoicing deadline.
E-Invoicing Framework and VAT Recovery
Under the new system, every invoice must bear a valid Invoice Reference Number from the NRS Merchant Buyer Solution (MBS) platform. Without it, the invoice is invalid for tax purposes, and the buyer forfeits the right to claim input VAT. For a sector that contributed N1.17 trillion in VAT and N881 billion in Company Income Tax in 2025, according to the National Bureau of Statistics, this is a critical issue.
Manufacturers purchase raw materials, logistics, packaging, maintenance, and energy from multiple suppliers, each with a VAT component. Recovering that VAT depends entirely on whether suppliers have boarded onto MBS. Even a manufacturer with fully compliant internal systems may find that a significant portion of their input VAT claims are invalid because their vendors are not onboarded.
The Compliance Gap
This compliance gap is often overlooked in boardroom discussions, which tend to focus inward. However, e-invoicing structurally links a company's tax position to its suppliers' readiness. If a vendor fails to onboard, the manufacturer absorbs the cost.
Kenya's experience with its eTIMS system is instructive. When the mandate took effect, fewer than 1% of eligible businesses had signed up. By late 2025, over 500,000 taxpayers had registered, but only 49% were actively transmitting invoices. This caused a supply chain fracture: larger businesses refused to transact with non-compliant suppliers to preserve their input VAT deductions, locking smaller vendors out of long-standing supply chains.
Lessons from Kenya and Zambia
At DigiTax, we supported businesses through similar transitions in Kenya and Zambia. Manufacturers who mapped their supplier base against eTIMS onboarding status early could work with vendors before enforcement. Others faced pressured supplier replacements or unabsorbed losses.
Nigeria's manufacturing sector is already fragile, with real GDP contribution slipping to 8.05% from 8.24% the previous year, and growth at a meager 1.4%. High energy costs, forex constraints, and infrastructure deficits continue to compress margins. A layer of irrecoverable VAT, triggered by a supplier's failure to onboard, would hit the sector hard.
Practical Implications
Finance and procurement teams must collaborate immediately to map suppliers against MBS onboarding status. Vendors not registered or not issuing validated invoices represent a direct cost. Many are mid-sized or small businesses unaware of Phase 2 obligations or lacking technical capacity. While their situation is understandable, the manufacturer's financial exposure remains unchanged.
The Minister rightly framed reforms around changing supply chains. The government's architecture promises a transparent commercial environment, but only if all supply chain participants are connected. Currently, significant gaps exist between the system and supplier networks. Kenya learned this lesson in real time; Nigeria still has weeks to learn it on better terms.
