Nigeria is undergoing a digital tax overhaul and FIRS E-Invoicing (also called the Merchant-Buyer Solution, MBS) is at the heart of it.
To what end?
To replace paper invoices, reduce tax evasion, and bring real-time transparency to transactions. For businesses, this means not only new obligations but, also new efficiencies. In this post, we break down what the system is, how it works, why it matters, key deadlines, and how to get ready. The answers to many of your questions will very well be covered in this piece.
What Is FIRS E-Invoicing (Merchant-Buyer Solution)?
- The Merchant-Buyer Solution (MBS) is FIRS’s central platform for issuing, validating, and tracking invoices electronically.
- Under this system, a business cannot simply issue an invoice to a customer; the invoice must first be sent to FIRS for validation in a structured format (JSON / XML / UBL) before it’s considered valid
- Once validated, FIRS issues a unique Invoice Reference Number (IRN) and Clearance Signature ID (CSID), these become part of the invoice record.
- The platform is being rolled out in phases; large taxpayers first, then medium and smaller ones.
Why FIRS Is Doing This ?
1. Close the VAT Gap / Increase Revenue
Electronic invoices reduce the opportunities for underreporting or hiding sales, thereby helping FIRS capture correct VAT.
2. Real-Time Visibility & Transparency
With each invoice cleared via the system, FIRS effectively gets near real-time insight into business activity—making audits, compliance checks, and tax collection more efficient.
3. Reduced Manual Errors & Costs
Automation reduces errors in invoice data entry, mismatches, and reconciliations. Also, less reliance on paper, manual processes, and physical filing.
4. Harmonized Structured Data
Invoices must conform to a standard schema (UBL / BIS Billing / structured JSON/XML). This standardization makes interoperability easier.
5. Better Compliance & Lower Tax Risk
Because FIRS already sees cleared invoices, mismatches between declared VAT and actual transactions become visible—and taxpayers must keep up or face penalties.
How the Process Works: Step by Step
Here’s a simplified version of how an invoice flows under FIRS’s e-invoicing model:
- Invoice Creation
Your business prepares invoice data (customer, line items, VAT, totals). - Schema Conversion & Pre-Validation
The invoice is structured into FIRS format (JSON/XML) and validated internally (e.g. required fields, consistency). - Submission to FIRS
The structured invoice is sent via API or portal to FIRS for validation. - FIRS Validation
FIRS checks data correctness, tax logic, format, TIN validity, etc. - Approval / Rejection
- If valid → FIRS issues IRN + CSID and returns “approved” status.
- If invalid → FIRS rejects with error messages; the invoice must be corrected and resent.
- Delivery to Customer
Once cleared, the invoice (with IRN/CSID) is delivered to the customer. - Storage & Reconciliation
You keep an audit record of every cleared invoice. You reconcile with your accounting ledgers and declare VAT returns using the cleared invoice data.
Key Deadlines & Phases You Should Know
- The initial rollout begins with large taxpayers (companies with turnover ≥ ₦5 billion) under pilot phases.
- The original compliance deadline was August 1, 2025, but FIRS later extended that deadline for large taxpayers to November 1, 2025.
- After compliance for large ones, medium and smaller companies will also come under the mandate (with phased rollout).
- In some sources, B2C transactions must be reported (not always pre-cleared) within 24 hours, and must include a QR code for buyer validation.
Challenges & Risks (What Businesses Should Watch Out For)
- Integration Complexity
Mapping your invoice data to FIRS’s schema (with all mandatory fields) is nontrivial, especially for customized ERP systems. - Rejection & Resubmission Overhead
Early in adoption, invoices may be rejected due to format errors or missing fields—fear of back-and-forths. - Security & Data Privacy
Exchanging sensitive tax/financial data requires strong encryption, token security, and audit logs. - System Downtime / Latency
If FIRS’s API is down or slow, it can delay invoice issuance. Businesses need fallback or retry logic. - Cost of Compliance
You may incur costs for system upgrades, developer time, testing, training, and change management. - Non-payment / Bad Debt Scenarios
An invoice cleared by FIRS still assumes VAT liability even if customer doesn’t pay. Businesses need mechanisms (credit notes, bad debt relief) to manage that risk.
How to Prepare & Steps Businesses Should Take
- Early Assessment & Gap Analysis
Review your existing invoice workflows, data sources, ERP/Accounting systems. - Onboard Registration
Ensure TIN registration, set up access with FIRS, and complete e-invoicing onboarding. - Select or Build an Integration Strategy
Options:- Use FIRS portal (manual entry, recommended only short term)
- Use third-party middleware / SaaS provider
- Build internal / in-house integration (or partner with tech firm)
- Schema Mapping & Testing
Map your invoice fields to FIRS schema, set up a testing environment, validate sample invoices. - Training & Change Management
Train your finance and IT teams, define roles (who issues, who reviews rejections), make process manuals. - Go Live & Monitoring
Begin live issuance, monitor first few transactions closely, handle rejections immediately. - Monthly Reconciliation & VAT Return Alignment
Ensure cleared invoices align with your VAT returns. Investigate discrepancies promptly.
FIRS’ e-Invoicing initiative is not just regulatory, it’s transformational. Businesses that prepare early will not only meet compliance but also enjoy gains in efficiency, transparency, and audit readiness. If your company needs help analyzing your readiness, mapping your data, building integrations, or training staff for FIRS e-invoicing, ASC can support you end-to-end. Reach out when you’re ready to take the next step.
