Joy Agwunobi
With January 19 now in focus, unease is rippling through Nigeria’s financial ecosystem. Across social media platforms, messages warning of an alleged “new 7.5 per cent VAT” on bank transfers and digital transactions have gone viral, fuelling fears that Nigerians could soon lose a portion of every naira sent or received electronically. For many households already stretched by rising living costs, the prospect of additional deductions has only heightened anxiety.
At the centre of the panic is a widespread misconception that the government is set to take 7.5 per cent of the actual value of bank transfers, peer-to-peer payments and other digital transactions. However, regulatory authorities insist that no such policy exists, and that the current debate reflects a misunderstanding of how value added tax has always applied within Nigeria’s financial system.
In an attempt to calm growing public concern, the Nigeria Revenue Service (NRS) issued a clarification, dismissing reports of a newly introduced VAT on electronic transfers and banking transactions as misleading. According to the agency, VAT has long applied to fees, commissions and service charges earned by banks and other financial institutions, and no new tax obligation has been imposed on customers.
“The Nigeria Revenue Service wishes to address and correct the misleading narrative circulating in sections of the media suggesting that value added tax has been introduced on banking services, fees, commissions or electronic money transfers,” the agency said, adding “This claim is categorically wrong.”
The tax authority explained that under Nigeria’s existing VAT regime, service charges earned by financial institutions have always been taxable. It further stressed that the Nigeria Tax Act did not introduce VAT on banking charges nor impose any new tax burden on customers, urging the public to rely on official communications for accurate information.
The regulator’s clarification comes against the backdrop of customer notifications issued by banks and fintechs in recent days, which largely triggered public concern. While the messages were intended to explain compliance requirements, their timing and wording inadvertently fuelled confusion, reinforcing fears that a new tax was being introduced rather than clarifying the continued application of existing VAT rules.
One of the most widely circulated notices came from Moniepoint Microfinance Bank, which informed customers on January 14, 2026, that it would begin applying VAT to certain banking services from January 19. In its message, the bank stated that it had been directed to collect a 7.5 per cent VAT and remit it to the Nigeria Revenue Service, formerly known as the Federal Inland Revenue Service (FIRS).
According to Moniepoint, the VAT would apply strictly to specific service charges, including electronic banking fees such as POS transaction fees, mobile transfers, USSD charges, POS activation fees, card issuance fees and Moniebook subscription costs. The firm was careful to clarify that the tax would not apply to interest earned on deposits or savings, and that the deductions would be transparently itemised on transaction statements.
“This is not a price increase by Moniepoint,” the company emphasised, noting that it was merely acting as a collection agent for the government. It also disclosed that the NRS had set January 19 as the compliance deadline for all financial institutions, including commercial banks, microfinance banks and electronic money transfer operators.
Yet for many customers, the distinction between VAT on service fees and VAT on transaction values was lost in translation. The phrase “collect 7.5 per cent VAT” was enough to trigger alarm, particularly among users of digital banking platforms where transactions are frequent and often small in value.
Expert unpacks the maths behind the VAT scare
In a televised interview aimed at calming public fears, Olu Akanmu, chief executive officer of Phillips and Samuel Limited, said the anxiety surrounding the 7.5 per cent VAT largely stems from a misunderstanding of how the tax is applied. According to him, many Nigerians wrongly believe the charge is imposed on the full value of funds sent or received, rather than on the service fees earned by banks.
“There is a lot of apprehension that needs to be corrected. People think the government is going to take 7.5 per cent of what they send or receive. That is not correct. The VAT is calculated as 0.075 per cent of the bank charges on the transaction, not the principal amount,”Akanmu said.
He explained that the actual financial impact on customers is minimal, particularly for low-value transactions. “For transfers below ₦5,000, where bank charges are typically small, the VAT amounts to about 0.75 kobo, less than one naira. Even for transactions between ₦5,000 and ₦25,000, where the service charge is ₦25, the VAT comes to roughly ₦1.88.”
“This is not an earthquake,” Akanmu said, adding that similar VAT charges have long been applied by traditional banks. He noted that what Nigerians are witnessing is increased compliance among fintechs that have grown significantly in scale and transaction volume.
“The banks have been charging these VAT amounts already. It is the fintechs that largely were not, partly because when you are small, you can operate under what we call regulatory arbitrage,” he said, adding “But as these fintechs become systemically important, you begin to see stricter compliance, both in regulation and taxation.”
Beyond correcting misconceptions, Akanmu raised broader policy concerns, arguing that better coordination is needed among government agencies to protect affordability in Nigeria’s digital payments ecosystem. He stressed the importance of collaboration between the tax authority, financial regulators and other relevant institutions to develop a macro policy that supports affordable digital micro-payments.
He pointed to existing inter-agency cooperation on stamp duty, where transactions below ₦10,000 are exempt, as a useful precedent. According to him, a similar approach could be adopted for VAT. “If we can exempt low-value transfers from stamp duty to protect low-income users, we can apply the same principle to VAT. Just as we have VAT exemptions on essential items like food, we can have VAT exemptions on low-value micropayments, such as transactions of ₦5,000.”
Akanmu argued that exempting such transactions would have minimal fiscal impact, given that the VAT involved is often less than one naira, while the broader economic benefits could be significant. “After all, the VAT on a ₦5,000 transaction is about 75 kobo. Let’s apply the same inter-agency principle to VAT for affordable digital micropayments because of its multiplying effects on the economy,” He said.
Looking beyond Nigeria, he pointed to international best practices in countries such as India and Brazil, where bank-to-bank and peer-to-peer transfers are largely free. In those countries, he explained, government-owned national digital payment infrastructures enable millions of people to transact at no cost, a model that has played a major role in driving financial inclusion.
However, he noted that Nigeria lacks a fully government-owned digital payment rail. The closest equivalent, the NIBSS Instant Payment (NIP) system, is privately built and must remain commercially sustainable. Nevertheless, Akanmu observed that NIP charges to banks have steadily declined over time, falling to as low as ₦3 per transaction.
“What regulators need to ensure is that as infrastructure costs fall, tariffs on low-value transactions also come down,” he said, while also adding “Whether through VAT exemptions or further reductions in bank charges, the end result should be that digital payments remain extremely affordable for low-income Nigerians.”
He concluded by emphasising the need for clearer communication from regulators and financial institutions alike, stressing that the prevailing public fear is misplaced.
“The apprehension needs to be corrected.This is not 7.5 per cent on your inflow or outflow,”Akanmu added.
