In a major move to solidify the nation’s digital tax framework, the Federal Government has directed all commercial banks, microfinance institutions, and fintech platforms to begin the collection and remittance of a 7.5% Value-Added Tax (VAT) on electronic banking service fees.
The directive, issued through the Nigeria Revenue Service (NRS) the recently rebranded Federal Inland Revenue Service (FIRS) is set to take effect on Monday, January 19, 2026. This enforcement marks a pivotal step in the implementation of the Nigeria Tax Act 2025, aimed at harmonizing tax collection across the rapidly expanding digital economy.
Scope of the New VAT Charges
Regulatory notices sent to customers by major fintech operators like Moniepoint and various commercial lenders clarified that the 7.5% VAT will not be applied to the principal amount being transferred. Instead, it applies strictly to the service fees charged by the financial institutions.
Key services that will now attract the 7.5% VAT include:
Mobile Banking Transfers: Fees charged for sending money to other accounts.
USSD Transactions: The convenience fees associated with using *966#, *737#, and similar shortcodes.
Card Issuance: Fees for the processing and delivery of new debit or credit cards.
POS Transaction Fees: Charges incurred during merchant payments or agency banking withdrawals.
Account Maintenance: Periodic fees for keeping accounts active.
For example, if a bank currently charges ₦25.00 for a transfer, a VAT of ₦1.88 (7.5% of the fee) will be added, bringing the total cost to the consumer to ₦26.88.
Revenue Drive Amidst Economic Reform
The timing of this enforcement aligns with the 2026 fiscal year's commencement and the Federal Government's aggressive push to expand non-oil revenue. Under the leadership of President Bola Tinubu, the administration has sought to "plug leakages" in the financial system.
According to NRS officials, the digital economy has historically outpaced traditional tax monitoring. By integrating a new Real-time Transaction Monitoring System, the government can now automatically reconcile VAT-eligible activities as they happen, ensuring that fintechs which previously operated under varying degrees of tax compliance are now fully captured in the tax net.
Mixed Reactions from Stakeholders
The announcement has sparked immediate concern among consumer advocacy groups. Chief Deolu Ogunbanjo, President of the National Association of Telecom Subscribers (NATCOMS), described the move as a "burden" on an already strained populace.
"Consumers are already paying ₦6.98 per USSD session. Now, they are adding a 7.5% VAT on top of that and other transfer fees. This amounts to multiple taxation on the same digital path," Ogunbanjo stated, hinting at potential legal challenges to the directive.
Conversely, some financial analysts argue that the move brings much-needed equity to the sector. Previously, traditional banks were more strictly monitored for VAT than newer fintech startups. The 2026 rules create a level playing field where every "electronic money transfer operator" follows the same remittance protocol.
What Remains Exempt?
To mitigate the impact on personal savings and financial inclusion, the government has specified certain exemptions. The 7.5% VAT will not apply to:
Interest Earned: Returns on savings accounts and fixed deposits remain tax-free.
Loan Interest: While loan processing fees attract VAT, the interest paid on the loan itself is exempt.
Low-Value Transfers: The existing ₦50 Stamp Duty (now formally reclassified from the Electronic Money Transfer Levy) continues to apply only to transfers of ₦10,000 and above, now borne by the sender rather than the receiver.
Transparency in Billing
The NRS has mandated that all financial institutions must itemize the VAT charge separately on transaction receipts and monthly statements. This transparency is intended to prevent banks from "hiding" the tax within increased service fees and to ensure customers know exactly how much is going to the government versus the service provider.
As the January 19 deadline approaches, Nigerians are encouraged to review their digital banking habits, as the cumulative cost of micro-transactions is expected to rise slightly under the new tax regime.
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