Nigeria’s Federal Inland Revenue Service (FIRS) has developed a real-time transaction monitoring portal to track VAT-eligible electronic transactions, marking a major shift in tax enforcement across the country’s fast-growing digital economy.
The Transaction Monitoring System, as it’s called, is designed to give FIRS real-time visibility into payments processed by banks, fintechs, card schemes, and other payment service providers (PSPs). While it doesn’t collect taxes directly, it allows the agency to assess taxpayer thresholds, reconcile invoices, and audit transaction data via a centralized dashboard.
“This system represents a transformative leap in transaction visibility. By monitoring VAT-eligible activities in real time, we are fostering a fair and transparent digital marketplace,” said Zacch Adedeji, Executive Chairman of FIRS.
How It Works
Financial institutions are now required to route transactions through the new system, especially those that involve consumer payments. The system works via API integration, meaning that institutions must register on the portal and transmit transaction data in real time. This includes VAT amounts, gross values, and categorization of each payment.
For PSPs like Paystack and Flutterwave, VAT must either be calculated on the total transaction value (if not done at checkout) or reported as-is (if already included). The VAT breakdown must be submitted alongside the transaction data to ensure accurate remittance.
Legal Backing and Compliance Timeline
While recent tax laws enacted in June 2025 under President Tinubu’s administration will allow for full automation of tax processes from January 2026, FIRS is currently relying on Section 25(4) of the FIRS Act, which permits such action with a 30-day notice.
Penalties for non-compliance are steep: ₦1 million for the first day of failure to grant access to the system and ₦10,000 for each additional day.
Data Integrity and Privacy
FIRS says the system uses encryption and AI-driven validation to ensure the integrity of all transaction data. Importantly, while the agency can collect financial transaction data, this doesn’t automatically translate into tax liability. Taxpayers can still file deductions through their self-assessment processes.
“The expansion of Nigeria’s digital economy has outpaced traditional tax monitoring methods,” FIRS noted. “Our platform focuses on real-time data collection, monitoring, and complete transparency.”
By integrating with financial institutions, the FIRS aims to close the biggest gaps in consumption tax compliance, especially as banks are only required to report transactions above ₦5 million. This portal now captures those lower-value digital transactions and plugs a critical leakage point in the system.
