FG Directs Banks, Fintech to Charge 7.5% VAT on Electronic, USSD Banking Services

The Federal Government of Nigeria has issued a directive requiring commercial banks, microfinance banks, and financial technology (fintech) firms to begin collecting and remitting a 7.5 per cent Value Added Tax (VAT) on selected electronic banking service fees, effective Monday, January 19, 2026.

Under the directive, the VAT will apply to specific electronic banking charges such as mobile money transfer fees, Unstructured Supplementary Service Data (USSD) transaction fees, and card issuance fees — but not on the actual amount being sent in a transaction.

Which Charges Attract VAT?

The tax is levied only on service fees charged by banks and fintech, not on the principal funds transferred. For example, if a bank charges ₦100 for a transfer, the 7.5 per cent VAT will apply only to that ₦100 service charge, meaning the customer pays an additional ₦7.50 on top of the fee.

The move was communicated to customers through email notices from payment platforms, including some fintech, informing users that the collection and remittance of the VAT is now a statutory requirement.

Government Position and Clarifications

The Federal Government, through the Nigeria Revenue Service (NRS), has described the VAT enforcement as part of existing tax obligations under Nigeria’s tax laws. Authorities have clarified that the charge is not a “new” tax on customers but a formal enforcement of VAT on identifiable service fees long recognized in the tax regime.

NRS officials emphasized that VAT has always applied to fees and commissions charged by banks and financial institutions, and the recent directive aims to harmonies compliance across the financial sector.

Public Reaction and Criticism

The announcement of the VAT enforcement has drawn public criticism and concern, with consumer groups and agent associations arguing that the levy amounts to double taxation and could increase the cost of everyday digital transactions such as bank transfers and USSD banking.

Many users have expressed frustration on social media, particularly after noticing the additional VAT on small transaction fees, underscoring concerns about the impact on daily financial activities — especially for low-income earners and informal sector participants who rely heavily on mobile transfers and USSD banking.

Industry and Financial Sector Impact

Banks and fintech companies are required to ensure that their systems are ready for the VAT implementation from January 19. Firms have begun updating their billing systems and communicating changes in fee structures to customers.

Industry analysts suggest that while the VAT may lead to additional operational costs for customers, organizations are obligated to comply with federal tax laws, and transparent itemization of VAT on transaction statements could help clarify the charges for end users,

What This Means for Nigerians

From January 19, Nigerians conducting electronic banking transactions — especially mobile transfers and USSD services — should expect to see a 7.5 per cent VAT added to service fees on applicable charges. This development reinforces the government’s broader effort to expand tax compliance and revenue mobilization in the digital economy era.

FAQ (Frequently Asked Questions)

Q: What services will attract the 7.5% VAT?
The VAT applies to electronic banking service fees such as mobile money transfer charges, USSD transaction fees, and card issuance fees — not on the amount of money transferred itself.

Q: When does this VAT directive take effect?
The directive takes effect from January 19, 2026.

Q: Is this a new tax?
Tax authorities have stated that VAT on bank service fees is not entirely new; rather, the directive enforces the proper collection and remittance of VAT under existing tax laws.

Q: Who issued the VAT directive?
The directive was issued by the Federal Government of Nigeria and communicated via banks and fintech platforms and upheld by the Nigeria Revenue Service (NRS).

Q: Will this VAT apply to savings or interest earned?
No. The VAT is applied only to service fees on electronic transactions and does not apply to interest earned on savings accounts.