In an effort to address tax evasion within Nigeria’s rapidly expanding digital economy, the Federal Inland Revenue Service (FIRS) has unveiled a new Transaction Monitoring System. This real-time portal, revealed in an internal presentation seen by TechCabal, will require banks, card schemes, fintech companies, and payment service providers to integrate their systems, providing the FIRS with unprecedented visibility into Value Added Tax (VAT)-eligible electronic transactions.
“This system represents a transformative leap in transaction visibility,” stated Zacch Adedeji, the Executive Chairman of FIRS. “By monitoring VAT-eligible activities in real-time, we are fostering a fair and transparent digital marketplace for all stakeholders.”
The Transaction Monitoring System is designed to route all financial institution transactions through its portal, enabling the FIRS to monitor VAT-eligible payments and identify where deductions may apply. This initiative marks a crucial shift in the tax agency’s approach to enforcing compliance within the financial services sector. Integration with the portal will allow the FIRS to automatically assess taxpayer thresholds and reconcile invoices. While the agency will not directly collect taxes via the portal, it will utilize a centralized dashboard for real-time transaction oversight.
The FIRS acknowledged the challenges posed by the rapid growth of Nigeria’s digital economy. “Nigeria’s digital economy has experienced exponential growth, transforming how businesses operate and process transactions,” the agency noted in its statement. “However, this expansion has outpaced traditional tax monitoring methods, creating gaps in transaction visibility and compliance.” The newly developed platform aims to address these gaps by focusing on “real-time data collection, monitoring, and ensuring complete transparency in the digital world.” The FIRS also emphasized its commitment to data security, claiming to use “encryption and AI-driven validation to maintain transaction integrity.”
Financial institutions are being targeted for integration due to their capacity to accurately document millions of micro-transactions. Currently, banks are only required to report transactions exceeding N5 million ($3,200). By integrating these institutions, the FIRS seeks to close a significant loophole in consumption tax collection and enable the auditing of tax declarations against bank records. This will also facilitate the standardization of information on taxable transactions.
This new directive aligns with the June 2025 tax laws enacted by President Bola Tinubu’s administration, which empower the FIRS to automate tax processes. Specifically, Section 71 of the Tax Administration Act allows the agency to deploy technology for tax assessment, collection, accounting, and data gathering. Non-compliance is met with steep penalties under Section 103, including a N1 million ($652) fine for the initial day of failure to grant system access, followed by N10,000 ($6.5) for each subsequent day of default. While these specific laws take effect in January 2026, the FIRS is currently leveraging Section 25(4) of the FIRS Act, which grants similar powers with a 30-day notice to taxpayers.
It is important to note that while collecting transaction data to improve tax compliance is legal, this data alone is not a definitive indicator of tax liability. The FIRS will cross-reference financial data with self-assessments, where individuals and businesses can claim eligible deductions that reduce their taxable income.
How the System Works
FIRS officials have reportedly held multiple Zoom meetings with financial institutions, outlining the plan and roadmap for integrating the Transaction Monitoring System. To onboard, institutions must register directly on the portal and integrate via APIs before activating their dashboard.
In a typical transaction flow, once a payment is received, financial institutions are required to first share the transaction data via API with FIRS’ VAT Rev Assure system – the agency’s technological tool designed to ensure accurate VAT calculation and prompt remittance – before transmitting it to the Transaction Monitoring System portal.
For payment service providers (PSPs) such as Paystack and Flutterwave, the process involves additional steps. If VAT is not collected at checkout, PSPs must calculate VAT on the total transaction value. If VAT is already included, they are required to submit either the merchant’s VAT or the PSP’s VAT amount along with the transaction data. All institutions must record both the VAT amount and the gross payment value for consumer transactions.
To facilitate this, PSPs will log in to a secure admin portal to share real-time transaction data, including the VAT component, for both merchants and customers. This data will then be grouped accordingly and pushed to the Transaction Monitoring System. A streamlined support channel will also be available for handling refunds.
