Nigeria’s drive toward a fully digital tax administration system is highlighting a significant technology gap among Micro, Small, and Medium Enterprises (MSMEs), with fewer than 15 percent currently using artificial intelligence (AI) in their operations. Experts warn this could slow compliance and expose businesses to new risks under the updated Nigeria Tax Act (NTA) reforms.

MSMEs play a crucial role as ancillary units supporting larger industries, contributing significantly to Nigeria’s industrial and economic development through production, manufacturing, and processing.

Digital Skills Gap a Major Concern
Digital skills consultant Akin Ayeni described the NTA reforms as a “transformative overhaul” that automates tax filings, eliminates manual errors, and demands a higher level of digital competence from taxpayers.

“The reforms require a new level of digital readiness from every taxpayer. AI skills are now essential—especially for MSMEs, the backbone of the economy,” Ayeni said.

He noted that AI is rapidly becoming a mandatory business tool, enhancing productivity, customer acquisition, cash-flow management, and access to finance. However, most small businesses remain unprepared due to limited national digital capacity, awareness gaps, and skills shortages—trends projected to worsen by 2025.

“These gaps will pose serious challenges for the Federal Inland Revenue Service (FIRS). The processes built into the new law are digitally driven and cannot be handled manually,” Ayeni added.

AI and Data Analytics: The New Business Essentials
Under the new system, businesses are expected to migrate to predictive digital tools that estimate tax liabilities, inform financial planning, and support strategic decision-making. AI will also be key for tracking invoices, analysing transactions, preparing accounts, generating reports, and supporting broader business strategies.

“Data analytics is now a core requirement for accountants and tax practitioners. Tools like Power BI are essential. The era of spending three days auditing data manually is over,” Ayeni emphasized.

Integration with National Tax Database
A key feature of the NTA reforms is API integration between company accounting software and the national tax database. This allows FIRS to automatically monitor income, expenses, and invoices in real time. E-invoicing is now mandatory, enabling instant receipt generation and improving compliance without the need to visit tax offices.

Training and Capacity Building
Ayeni’s firm, EDLI Digital, is launching specialized programs on AI adoption, digital readiness, and NTA compliance. The courses cover prompt engineering, data analytics, business AI tools, and system integration with FIRS platforms. The company has also published a book on practical AI applications for Nigerian SMEs.

“When you understand the cost of not training, you will realize education is cheaper than ignorance,” Ayeni said.

Incentives and Compliance Requirements
The reforms include new incentives for small businesses:

• Companies with turnover below ₦100 million will not pay company income tax.
• Individuals running unregistered businesses could face higher tax burdens once turnover exceeds ₦50–100 million.

Ayeni stressed that awareness and education are critical to take advantage of these incentives. He also noted that Nigerian banks are already leveraging AI tools, e-invoicing systems, and advanced digital compliance platforms, with ongoing recapitalization boosting adoption of business intelligence technologies.

“Nigeria’s shift to a fully digital tax ecosystem marks a decisive turning point. MSMEs must understand the new tax law, embrace AI, and start building digital capacity immediately, or risk being left behind,” Ayeni warned.