Nigerian bank customers are set to face increased costs on digital transactions as a new 7.5% Value Added Tax (VAT) on service fees for mobile and USSD banking comes into effect. The new levy, scheduled to begin on January 19, 2026, will be applied in addition to the existing N50 stamp duty on electronic transfers of N10,000 and above.
Expert Insight on the New Banking Levy
Financial analyst Gilbert Ayoola has provided clarity on the impending charges, explaining that the VAT will be levied solely on the transaction fees imposed by banks, not on the principal amount being transferred. Ayoola, who chairs the Ibadan Zone Shareholders' Association, stated that this move signifies stricter adherence to federal tax laws and aligns with the government's push to boost revenue generation.
"Banks' implementation of VAT on digital transactions reflects stricter compliance with federal tax regulations and increased alignment with the government's revenue mobilisation drive," Ayoola noted. He added that as digital banking becomes the primary channel for financial activities, regulators are intensifying efforts to ensure all taxable services within the sector are properly captured.
How the New Charges Will Work for Customers
The new tax regime will create a layered cost structure for users. When conducting a mobile or USSD transfer, customers will pay:
- The standard bank transaction fee.
- A 7.5% VAT calculated on that transaction fee.
- The statutory N50 stamp duty for any electronic transfer of N10,000 or more.
Ayoola emphasized that this combined effect means everyday banking will become more expensive, with the VAT applying directly to the cost of using the banking service itself.
Expected Impact on Users and the Economy
The expert warned that the burden of these additional costs will likely be felt most acutely by low- and middle-income earners, small businesses, and informal traders. These groups often rely heavily on USSD banking due to limited access to smartphones or stable internet connectivity.
"Frequent small-value transfers could cumulatively become more expensive, prompting some users to consolidate transfers, reduce transaction frequency, or explore alternative payment channels," Ayoola explained.
However, he also suggested that the increased cost could drive innovation within the financial sector, potentially leading banks and fintech companies to develop lower-cost channels or bundled service packages to retain their customer base. From a broader economic perspective, Ayoola noted that taxing the rapidly growing digital banking ecosystem helps modernize the tax framework and strengthens non-oil revenue, which is a key priority for the government.
The change follows amendments under the Nigeria Tax Act 2025, which replaced the previous Electronic Money Transfer Levy (EMTL) with a stamp duty charge. The real-world impact was highlighted when Lere Olayinka, an aide to the FCT Minister, shared that a routine transfer of N80,000 incurred a total deduction of N53.75 under the new rules.
