Nigeria’s Federal Government has issued a fresh directive mandating banks, fintech companies, and other electronic money operators to collect and remit Value Added Tax (VAT) on service fees charged on selected digital financial transactions, marking a significant shift in the taxation of the country’s fast-growing digital economy.
The new directive, which takes effect from Monday, January 19, 2026, requires financial institutions to apply a 7.5 per cent VAT on eligible electronic banking charges, including mobile transfers, USSD transactions, and card issuance fees.
The tax will be deducted strictly from the service fee charged by banks or fintech platforms, not from the principal amount transferred by customers.
Industry sources confirmed that several payment service providers have already begun notifying customers of the change, with more institutions expected to issue formal communications in the coming days.
VAT on Service Fees to Apply Across Digital Banking Platforms
Under the new framework, VAT on service fees will be imposed on a wide range of electronic banking services that form the backbone of Nigeria’s digital payments ecosystem.
These include charges associated with mobile banking transfers, USSD-based transactions, and fees for issuing debit or prepaid cards.
For instance, if a bank or fintech platform charges ₦100 for a funds transfer, the applicable VAT of 7.5 per cent will be calculated on the ₦100 service fee, amounting to ₦7.50.
The tax does not apply to the amount being transferred between accounts.
In a notice shared with customers, one major payment platform explained that the new deduction is a statutory requirement backed by federal tax regulations.
“From January 19, 2026, we are required to collect a 7.5 per cent VAT on applicable service fees and remit same to the Nigerian Revenue Service,” the notice stated.
The Nigerian Revenue Service (NRS), formerly known as the Federal Inland Revenue Service, has set compliance deadlines for all commercial banks, microfinance banks, and electronic money operators operating within the country.
Government Pushes for Uniform Tax Compliance
Officials say the directive is part of broader efforts by the Federal Government to standardise tax collection across Nigeria’s financial services sector and close revenue leakages arising from uneven enforcement.
Although VAT has historically applied to certain banking services, regulators note that inconsistent application across platforms created loopholes, particularly within the fintech space, where transaction volumes have surged over the past decade.
By enforcing uniform remittance of VAT on service fees, the government aims to ensure that all financial institutions—traditional banks and digital platforms alike—operate on a level regulatory playing field.
Industry insiders say the policy also aligns with ongoing reforms under Nigeria’s evolving tax and fiscal framework, which seeks to widen the tax base without increasing headline tax rates.
Customers Assured of Transparency
To address concerns over hidden charges, operators have assured customers that VAT deductions will be clearly itemised on transaction statements and digital receipts.
This means users will be able to see the service charge and the VAT component separately, improving transparency and accountability.
Payment firms have also emphasised that the policy does not amount to a price increase initiated by service providers.
“This is not an arbitrary increment,” one fintech operator said. “We are simply complying with a statutory obligation to collect and remit VAT to the appropriate authority.”
Importantly, interest earned on savings and fixed deposit accounts remains exempt from VAT, ensuring that customers will not be taxed on returns generated from their deposits.
Impact on Consumers and the Digital Economy
While the VAT itself is modest, analysts warn that its cumulative impact could be felt by frequent users of digital banking services, especially small businesses and individuals who rely heavily on daily electronic transfers.
Nigeria’s cashless policy has driven exponential growth in electronic payments, with millions of transactions processed daily across mobile apps, USSD platforms, and point-of-sale terminals. As transaction volumes increase, even small charges can add up over time.
However, fiscal experts argue that the structured application of VAT on service fees is necessary to support government revenue, particularly at a time when oil earnings remain volatile and public expenditure pressures are rising.
Connection to Broader Tax Reforms
The VAT directive follows closely on the heels of other fiscal measures introduced under Nigeria’s new tax regime.
In December, several banks notified customers of the reclassification of the Electronic Money Transfer Levy (EMTL) as stamp duty, applied to electronic transfers of ₦10,000 and above.
Under the revised framework, the ₦50 stamp duty is charged as a one-off fee on qualifying transfers, further reinforcing the government’s push to formalise revenue collection from digital transactions.
Tax experts say these reforms signal a long-term strategy to modernise Nigeria’s tax system and align it with global best practices for taxing digital financial services.
Compliance Timeline and Enforcement
The NRS has made it clear that failure to comply with the directive will attract sanctions under existing tax laws. Regulators are expected to intensify monitoring of banks and fintechs to ensure accurate collection and timely remittance of VAT proceeds.
With Nigeria’s digital economy projected to grow significantly over the next decade, authorities believe consistent enforcement of VAT obligations will strengthen public finances without discouraging innovation.
As the January 19 implementation date approaches, customers are advised to review transaction notifications and fee breakdowns carefully.
While the VAT does not apply to transferred funds themselves, awareness of applicable service charges will help users better manage transaction costs.
Ultimately, the enforcement of VAT on service fees underscores the Federal Government’s determination to integrate Nigeria’s digital financial ecosystem into the formal tax net, balancing revenue generation with transparency and regulatory clarity.
