Nigerian banks and financial technology companies will start collecting a 7.5 percent Value Added Tax (VAT) on electronic banking service fees from Monday, January 19, following a directive from the Nigerian Revenue Service (NRS) aimed at standardizing tax compliance across the digital finance sector.
The tax applies to service charges including mobile banking transfer fees, Unstructured Supplementary Service Data (USSD) transaction costs, Point of Sale (POS) fees, card issuance charges, and loan processing fees. Interest on deposits, savings accounts, and loan advances remains exempt from the levy.
Moniepoint Microfinance Bank notified customers Wednesday that the collection requirement stems from a government endorsed regulatory change mandating all commercial banks, microfinance banks, and electronic money transfer operators to comply by the January 19 deadline. The fintech operator emphasized the charge represents a statutory obligation rather than a price increase by individual institutions.
The Nigerian Revenue Service issued a clarification Thursday addressing confusion about whether customers or financial institutions bear the tax burden. A senior NRS official told Nigerian media that the 7.5 percent VAT applies only to the service fees banks charge, not to transaction values themselves, meaning banks absorb the cost rather than passing it directly to customers.
For example, on a transfer subject to the existing N50 stamp duty, the VAT calculation applies to that N50 charge rather than the total amount being transferred. The tax authority stressed that VAT on banking services is not newly introduced under the Nigeria Tax Act but has always applied to fees, commissions, and charges associated with financial services.
The NRS statement signed by Dare Adekanmbi, Special Adviser on Media to Chairman Zacch Adedeji, dismissed claims circulating in Nigerian media suggesting VAT had been newly imposed on banking services as categorically incorrect and misleading. The agency explained it is now enforcing uniform compliance across all platforms to eliminate gaps in collection that previously existed.
Consumer advocacy groups reacted strongly to the implementation despite the clarifications. Deolu Ogunbanjo, President of the National Association of Telecom Subscribers of Nigeria (NATCOMS), described the policy as cruel and argued it amounts to double or multiple taxation since consumers already pay N6.98 per USSD session before the additional VAT.
Ogunbanjo threatened legal action if the Federal Government does not review the tax, stating that the measure will burden bank customers during a period of harsh economic conditions. He emphasized that USSD and bank transfers are essential services for nearly everyone in Nigeria, particularly those without access to smartphones or internet banking.
The VAT enforcement comes weeks after Nigerian banks began deducting N50 stamp duty on electronic transfers of N10,000 and above starting January 1, 2026, following implementation of the updated Tax Act. The stamp duty replaced the previous Electronic Money Transfer Levy (EMTL) classification and applies as a one time charge per qualifying transaction on top of regular transfer fees.
Industry analysts estimate the combined impact of stamp duty and VAT on service fees will increase the cumulative cost of digital banking for millions of Nigerians who rely heavily on mobile banking platforms for daily financial transactions. Regular users sending money, paying bills, or accessing banking services will see higher total charges even though individual fee increases may appear small.
Financial institutions have assured customers that VAT charges will be clearly itemized and displayed separately on transaction receipts and account statements. The tax will be collected by banks and fintech operators then remitted to the Nigerian Revenue Service under the new standardized compliance framework.
The enforcement aligns with broader government efforts to expand revenue generation as Nigeria’s digital economy grows rapidly. Mobile banking and fintech adoption has surged in recent years, with millions of previously unbanked Nigerians now accessing financial services through digital channels including USSD codes that work on basic mobile phones.
The Association of Licensed Telecom Operators of Nigeria (ALTON) could not be reached for comment, but an official from one of Nigeria’s major mobile network operators described the VAT on USSD as unusual and predicted it will increase burdens on telecom customers while potentially reducing operator revenues. The official, speaking anonymously, argued the implementation violates taxation principles including fairness and will cause revenue loss and job losses.
States are projected to receive combined distributions of N5.07 trillion from VAT in 2026, representing 55 percent of the total distributable VAT pool of N9.23 trillion according to government revenue projections. The 36 states depend significantly on VAT allocations to fund public services and infrastructure development.
Banking services subject to the VAT include POS activation fees, Moniebook subscriptions offered by fintech platforms, and various documentation charges. The 7.5 percent rate remains unchanged under current tax law, though enforcement across digital financial services has intensified to ensure consistency.
The Nigeria Revenue Service, formerly known as the Federal Inland Revenue Service until its recent rebranding, has made tax compliance and revenue optimization central priorities. The agency argues that proper VAT collection on banking services brings Nigeria in line with international standards where financial service fees typically attract consumption taxes.
Small businesses and individual entrepreneurs who rely heavily on digital payments expressed concern that accumulating transaction costs could erode profit margins. Market traders, transport operators, and petty merchants increasingly depend on POS terminals and mobile transfers to conduct business, making them particularly sensitive to fee increases.
The timing coincides with Nigeria’s banking sector recapitalization exercise, which requires institutions to meet revised minimum capital thresholds by March 31, 2026. Central Bank of Nigeria Governor Olayemi Cardoso disclosed that 27 banks have tapped capital markets through public offers and rights issues, with 21 of 37 commercial, merchant, and non interest banks meeting or exceeding new requirements.
Policymakers expect stronger bank balance sheets will help institutions withstand macroeconomic shocks, finance economic growth, and restore confidence in the financial system following recent economic turbulence. The combination of recapitalization and enhanced tax compliance aims to position Nigerian banks for sustainable long term performance.
