By Olumide Akinsola

Last week in Abuja, Finance Minister Taiwo Oyedele stood before a room of tax professionals at the Chartered Institute of Taxation of Nigeria’s 28th Annual Tax Conference and made a point that deserved more attention than it received.

While outlining the government’s digital compliance agenda, he noted that countries everywhere are being forced to modernise their tax systems because of, among other things, changing supply chains.

He was speaking at a policy level. What I want to do is bring that observation down to the factory floor, because for Nigerian manufacturers preparing for the July e-invoicing deadline, the supply chain question Mr Oyedele raised is about to become one of the most consequential financial variables in their operations.

Under the new framework, every invoice must carry a valid Invoice Reference Number issued through the NRS Merchant Buyer Solution platform before it reaches the buyer. Without one, the invoice is treated as invalid for tax purposes, and the buyer loses the right to claim input VAT on that transaction entirely.

For a sector that contributed N1.17 trillion in VAT and N881 billion in Company Income Tax in 2025, according to the National Bureau of Statistics, this is material.

A manufacturer producing consumer goods or building materials buys raw materials from multiple suppliers, pays for logistics, sources packaging, contracts maintenance, and purchases energy. Each of those transactions carries a VAT component, and under the reformed system, each is recoverable.

But the recovery depends entirely on whether the supplier who issued the invoice has boarded onto MBS. A manufacturer can invest in getting their own systems right, integrate fully, train their finance team, and still find that a meaningful share of their input VAT claims are invalid because the vendors they buy from have not done the same.

This is the compliance gap that the conference conversation did not reach. Most boardroom discussions, to the extent they are happening, focus inward: what do we need to do to get ready? That is a reasonable starting point, but it misses the structural reality of how e-invoicing works.

Your tax position is partly determined by your suppliers’ decisions about their own readiness. If a vendor you depend on has not onboarded, you absorb the cost. Your compliance programme and theirs are financially linked.

Kenya went through a version of this transition with its eTIMS system, and the numbers are instructive. When Kenya’s e-invoicing mandate took effect, fewer than 1% of eligible businesses had signed up, according to EY’s East Africa practice. By late 2025, onboarding had grown to over 500,000 taxpayers, but even among those registered, only about 49% were actively transmitting invoices.

The result was a supply chain fracture that moved with speed few anticipated: larger businesses began refusing to transact with non-compliant suppliers because accepting their invoices meant forfeiting the right to deduct those expenses. Smaller vendors found themselves locked out of supply chains they had served for years.

At DigiTax, we supported businesses through that transition in both Kenya and Zambia, and the speed at which the disruption shifted from compliance to procurement caught many manufacturers off guard.

Those who had mapped their supplier base against eTIMS onboarding status early were able to work with their vendors before enforcement. Everyone else was replacing suppliers under pressure or absorbing losses they had not budgeted for.

Nigeria’s manufacturing sector is already stretched. Real GDP contribution slipped to 8.05% last year from 8.24% the year before, and growth remains fragile at 1.4%. High energy costs, foreign exchange constraints, and infrastructure deficits continue to compress margins.

A layer of irrecoverable VAT on top of those pressures, triggered by nothing more than a supplier’s failure to onboard, is the kind of cost a sector growing this slowly will feel acutely.

The practical implication is that finance teams and procurement teams need to be in the same room right now, mapping the supplier base against MBS onboarding status.

Vendors who have not registered, or who have registered but are not yet issuing validated invoices, represent a direct cost to every business that buys from them. Many are mid-sized or small businesses that may not yet be fully aware of their obligations under Phase 2, or that lack the technical capacity to integrate before July. This is understandable, given the pace of the reforms. The manufacturer’s financial exposure remains the same regardless.

The Honourable Minister of Finance was right to frame the tax reforms around changing supply chains. The architecture the government is building will, over time, create a more transparent commercial environment.

It will only deliver those results when participants across the supply chain are connected to it, and right now, across manufacturing, there are significant gaps between the system the government has built and the supplier networks that are supposed to run through it. Kenya learned that lesson in real time. Nigeria still has a few weeks to learn it on better terms.

Olumide Akinsola is Country Director at DigiTax, a pan-African e-invoicing platform accredited by the Nigeria Revenue Service as an Access Point Provider and System Integrator.