The ₦5 Million Penalty: Why Vendor TIN Verification is Now Critical

TaxHQ Editorial•5 January 2025•6 min read

The New Reality

One of the most significant (and least discussed) provisions of the Nigeria Tax Administration Act 2025 is the ₦5,000,000 penalty for awarding contracts to unregistered persons.

Yes, you read that right. If you engage a vendor, supplier, or contractor who doesn't have a Tax Identification Number (TIN), your company faces a five million naira fine. Per transaction.

Why This Matters

According to tax expert Toyin Olufon of Lefort Consulting, this provision is designed to "bring everyone into the tax net." The government recognizes that many businesses operate informally, and this penalty creates a strong incentive for formal registration.

Who This Affects

**Procurement departments** awarding contracts
**Finance teams** processing vendor payments
**HR departments** engaging contractors
**Small businesses** working with informal suppliers

How to Protect Your Business

1. Implement TIN Verification

Before onboarding any vendor, verify their TIN. You can use:

FIRS TIN verification portal
Our [Vendor Compliance Checker](/business/vendor-check)
Direct inquiry to the vendor

2. Update Your Vendor Onboarding Process

Add TIN verification as a mandatory step in your vendor registration. No TIN = no payment.

3. Audit Existing Vendors

Review your current vendor database. Identify vendors without TINs and give them a deadline to register.

4. Document Everything

Keep records of TIN verification for all vendors. This protects you in case of audit.

What If Your Vendor Doesn't Have a TIN?

Help them register! TIN registration is free and can be done at:

Any FIRS office
JTB (Joint Tax Board) website
State Internal Revenue Service offices

The process typically takes 24-48 hours.

The Bottom Line

The ₦5 million penalty is not theoretical - it's in the law. Smart businesses are already implementing vendor compliance checks. Don't wait until an audit to find out you're exposed.

Use our Vendor Compliance Checker to verify vendors before every transaction.

TIN verificationvendor compliancepenaltiesNigeria Tax Administration Act

TaxHQ Editorial

Expert tax content based on Nigeria Tax Act 2025 and insights from leading Nigerian tax professionals.