Nigeria's efforts to increase tax revenue may be undermined by the additional costs businesses incur to comply with digital tax requirements. Despite reforms aimed at making the tax system more transparent and efficient, businesses, especially small and medium-sized enterprises (SMEs), are facing significant compliance costs. According to Yvonne Afolabi, a principal consultant at Techpoint Finance Consults, these costs can range from N2 million to N10 million for small businesses and N10 million to N50 million for medium-sized businesses in the first year alone.
The compliance costs are not limited to the initial investment in accounting software, enterprise resource planning systems, and e-invoicing integration. Businesses also incur additional costs for staff training, tax advisory services, and stronger internal controls. Furthermore, integration with e-invoicing platforms can add between N500,000 and N5 million, depending on existing systems and transaction volumes. Large organisations implementing enterprise-wide digital tax systems may face costs exceeding N100 million. Afolabi also notes that businesses often underestimate hidden costs, including consultancy fees, cybersecurity upgrades, and productivity losses during implementation.
The concerns about compliance costs come as businesses continue to identify taxation as a major constraint. The Central Bank of Nigeria's July 2026 Business Expectations Survey found that high and multiple taxation was the most significant constraint identified by businesses, with 70.8 percent of respondents citing it. However, some businesses have reported positive experiences under the reforms. Oluwafemi Imonikhe, managing director of Adunola West Africa International Enterprises, said digitalisation had improved the structure and transparency of tax compliance by providing clearer requirements for filing annual tax returns.
Imonikhe noted that compliance could still be costly due to documentation requirements and professional fees paid to tax consultants. However, as a formalised business with a tax identification number, his company does not face additional costs, multiple tax demands, or uncertainty over its tax liabilities when it remains compliant. He called for greater coordination among tax authorities through a single computerised tax system, which would make compliance easier and more predictable. This, he believes, would encourage his company to expand its operations and contribute more to national revenue generation.
A six-month assessment by the Lagos Chamber of Commerce and Industry and PwC found that 40.9 percent of respondents reported a positive impact of the reforms on cash flow or working capital, while 4.5 percent reported a negative impact. The survey also found that 42.8 percent of respondents viewed digital tax platforms positively, although coordination between federal and state tax authorities was identified as the weakest area of implementation.
The Tax Ombud has argued that sustainable revenue collection requires taxpayer trust, fairness, and accountability alongside stronger revenue mobilisation. For businesses, the success of the reforms may ultimately be measured not only by how much revenue the government collects but also by how much it costs businesses to comply. Nigeria Revenue Service data show that the government collected N28.3 trillion in tax revenue in 2025 and is targeting N40.71 trillion in 2026.
As authorities pursue the increase in tax revenue, businesses and tax experts say making compliance simpler and more predictable could help existing taxpayers comply while encouraging more businesses to enter and remain in the formal tax system. This could, in turn, help the government widen the tax base. The findings highlight the need for a balanced approach to tax reforms, one that prioritises both revenue mobilisation and taxpayer experience.
Key points
- High compliance costs may undermine Nigeria's tax revenue drive despite digital tax requirements aimed at increasing transparency and efficiency.
- The cost of compliance can range from N2 million to over N100 million for businesses, depending on their size and existing systems.
- Simplifying compliance and improving coordination among tax authorities could help widen the tax base and increase revenue.
