The Nigerian government has officially begun the enforcement of a 7.5% Value Added Tax (VAT) on fees for digital banking services, a move that took effect from January 19, 2026. This policy clarifies the application of the existing VAT rate to charges for electronic transactions, including mobile app transfers and USSD banking sessions.
What Exactly is Being Taxed?
It is crucial for Nigerians to understand the distinction. The tax authority is not imposing VAT on the principal amount of money you send. If you transfer ₦10,000, the full ₦10,000 reaches the recipient. The VAT applies specifically to the service charge or transfer fee levied by your bank or telecom operator.
For example, if your bank charges a ₦10 fee for a transfer, a 7.5% VAT (₦0.75) will be added to that fee, making the total service cost ₦10.75. The same principle applies to USSD transactions; VAT is calculated on the session cost, not on the funds being moved.
How This Will Appear on Your Account
Financial institutions are expected to display the VAT as a separate line item or embed it clearly within the transaction charge on your alerts. For the average individual, the immediate increase is modest—often just a few kobo per transaction.
However, the cumulative effect could be more noticeable for small businesses, traders, Point-of-Sale (POS) operators, online vendors, and individuals who conduct a high volume of daily transactions. These groups are likely to feel the pinch more acutely over time.
Government Rationale and Public Reaction
The government's objective is to broaden the tax net without raising the standard VAT rate, which has been at 7.5% since 2020. With the explosive growth of digital payments, authorities view banking and telecom service fees as a consistent and trackable revenue stream.
Officials argue that VAT is a consumption tax, rightly applied when services are used, including digital financial services. Banks and telecom operators have stated they are merely complying with existing tax laws and recent regulatory guidance.
Despite the official stance, the move has sparked frustration among many Nigerians, particularly low-income users who heavily rely on USSD for banking due to its accessibility without internet. The perception of being taxed on essential financial services adds to the strain in a challenging economic climate.
Strategies to Mitigate the Impact
While the VAT itself cannot be legally avoided, users can adopt strategies to minimize the overall burden of transaction charges:
- Consolidate transactions by making fewer, larger transfers instead of numerous small ones.
- Compare and use banking channels or platforms that offer lower base service fees.
- Monitor charges from different banks and consider switching to institutions with more competitive transfer costs.
It is important to note that, even with the added VAT, digital banking remains a cheaper and safer alternative to cash handling for most Nigerians.
In summary, the enforcement of the 7.5% VAT on mobile and USSD transaction fees represents a policy of clearer application rather than a new tax. Nigerians should now expect slightly higher transaction charges and more transparent fee breakdowns on their bank statements as the new measure takes full effect across the financial sector.
