In a bold regulatory pivot, Nigeria’s Federal Inland Revenue Service (FIRS) is rolling out a real-time transaction monitoring system to track Value Added Tax (VAT)-eligible digital payments. The platform—dubbed the Transaction Monitoring System (TMS)—will require banks, fintechs, card schemes, and payment service providers to integrate directly, giving the tax agency unprecedented visibility into the country’s booming digital economy.
“This system represents a transformative leap in transaction visibility,” said Zacch Adedeji, FIRS Executive Chairman. “By monitoring VAT-eligible activities in real time, we are fostering a fair and transparent digital marketplace for all stakeholders.”
The system is not designed to collect taxes directly, but will track and record transaction data via a centralised dashboard, allowing FIRS to assess thresholds, reconcile invoices, and audit self-declared tax submissions. By connecting to the TMS via secure APIs, institutions will be expected to share gross transaction values, VAT amounts, and applicable merchant data in real time.
FIRS argues that the expansion of Nigeria’s digital economy has outpaced traditional tax systems, leaving gaps in compliance. According to the agency, the new system will leverage encryption and AI validation tools to ensure the security and accuracy of all data captured.
A key rationale behind the push is that banks are only required to report transactions over ₦5 million ($3,200). However, fintechs and PSPs process millions of microtransactions daily that often slip under regulatory radar. By tapping into this layer, FIRS aims to plug the largest leakage point in VAT collection.
The legal backing for this shift comes from the Tax Administration Act (Section 71), passed in June 2025, which allows FIRS to automate tax processes. While the new rules officially take effect in January 2026, FIRS is relying on Section 25(4) of the FIRS Act to enforce a 30-day compliance notice for institutions.
Penalties for non-compliance are steep: ₦1 million ($652) for the first day, and ₦10,000 ($6.5) per day thereafter.
During Zoom briefings with financial institutions, FIRS outlined the onboarding roadmap: API integration, real-time data relay to the VAT Rev Assure system, and secure login to the TMS admin portal. For PSPs, if VAT isn’t collected at checkout, they must calculate and declare it; if it is, they must still submit the breakdown of gross and VAT components.
This marks a defining moment in Nigeria’s effort to modernize tax infrastructure in line with the digital economy’s exponential growth.
