What is an invoice and why do Nigerian businesses need one?
An invoice is a formal document issued by a seller to a buyer, specifying goods or services supplied, their quantities, agreed prices, and payment terms. In Nigeria, invoices serve as legally binding records of commercial transactions. The Nigerian Revenue Service (NRS), formerly NRS, requires businesses registered for VAT to issue tax invoices for every taxable supply. Without proper invoices, businesses cannot claim input VAT credits, which can significantly increase their tax burden.
What must a VAT invoice include under Nigerian law?
According to the Value Added Tax Act and NRS (formerly NRS) regulations, a valid Nigerian VAT invoice must include: (1) The word 'Tax Invoice' prominently displayed, (2) The supplier's full name, address, and TIN (Tax Identification Number), (3) The customer's name and address, (4) A unique sequential invoice number, (5) Date of issue, (6) Description of goods or services supplied, (7) Quantity and unit price, (8) VAT rate (currently 7.5%) and the VAT amount calculated, (9) Total amount payable including VAT. Businesses not registered for VAT issue regular invoices without VAT details.
What are standard payment terms for Nigerian SMEs?
Common payment terms used by Nigerian small businesses include: Net 30 (payment due within 30 days), Net 7 or Net 14 for smaller transactions, and 50% upfront / 50% on delivery for services. Late payment penalties should be clearly stated — typically 5–10% monthly interest on overdue balances. For recurring clients, some businesses use end-of-month terms (EOM). Always specify the payment method accepted (bank transfer, cash, POS terminal, mobile money via Kontrol).
Are digital/electronic invoices legally valid in Nigeria?
Yes. The Cybercrimes (Prohibition, Prevention, Etc.) Act 2015 and the Electronic Transactions Bill recognize electronic documents as legally valid in Nigeria. Digital invoices sent via email, WhatsApp, or generated through accounting software like Kontrol are legally enforceable. The key requirement is that the content is accurate, tamper-evident, and traceable to the issuing business. Retaining digital invoices for at least 6 years is recommended to meet NRS audit requirements.
What happens if a client refuses to pay an invoice in Nigeria?
If a client does not pay, Nigerian businesses have several remedies: (1) Send a formal demand letter citing the invoice number and amount due, (2) File a small claims suit at the Magistrate Court for amounts up to ₦5 million (jurisdiction varies by state), (3) Initiate mediation through the Lagos Multi-Door Courthouse or similar ADR bodies, (4) Use Kontrol's debt recovery tool to automate reminders, generate demand letters, and escalate to partner lawyers. Most debts under ₦10 million can be resolved through negotiation or small claims without going to the High Court.
How does withholding tax (WHT) affect invoicing?
Withholding Tax (WHT) is deducted at source by the payer when paying for specific services in Nigeria. Common WHT rates: 5% on consulting/management fees, 5% on technical services, 10% on rent. When you send an invoice for a WHT-applicable service, the client will deduct WHT and pay you the net amount plus issue a WHT credit note. You can use that credit note to offset your CIT (Companies Income Tax) liability. Always indicate whether WHT applies on your invoice and reconcile WHT receipts monthly.
How do I handle recurring invoices for subscription-based services?
For businesses offering subscription or retainer services in Nigeria, recurring invoices should be automated. Set up a recurring invoice schedule — monthly, quarterly, or annually — with a clear subscription start date, renewal terms, and cancellation policy. Platforms like Kontrol automate this: you set the amount, frequency, and client, and invoices are sent automatically. Always include the subscription period on the invoice (e.g., 'April 2025 retainer — legal compliance services') for clear record-keeping.
Can Nigerian businesses invoice in foreign currency?
Yes, Nigerian businesses can invoice in foreign currency (USD, EUR, GBP) for export transactions or services rendered to foreign clients, subject to CBN (Central Bank of Nigeria) foreign exchange regulations. All foreign currency receipts must be declared and repatriated through an authorised dealer bank within 90 days. For domestic transactions, the Naira (₦) is required. Multi-currency invoicing on platforms like Kontrol automatically handles both Naira and foreign currency billing, with exchange rate recording at the date of transaction.
