The Nigeria Revenue Service (NRS) and the Agents Association of Nigeria are at loggerheads over the application of Value Added Tax (VAT) on banking transaction charges, with the association labeling it a form of double taxation that could reverse financial inclusion gains.
Agents Association Faults New VAT Directive
National President of the Agents Association of Nigeria, Sarafadeen Atanda Fasasi, has strongly criticized the planned application of a 7.5 per cent VAT on fees for bank transfers and USSD services, effective from Monday, January 19, 2026. The directive, reportedly issued by tax authorities and communicated to customers by fintech operators like Moniepoint, mandates financial institutions to begin collecting and remitting VAT on selected banking services.
Fasasi argues that this move amounts to duplicating VAT, as electronic payments are typically made to settle goods or services that have already been taxed. He provided a detailed example to illustrate the cumulative burden on consumers.
"For instance, buying a carton of Noodles at N20,000 from the supermarket or withdrawing the cash at a PoS for the purchase currently attracts 7.5% VAT + N50 EMTL + Transfer charge N20-N200 + SMS charge N6. All paid by the buyer," Fasasi stated.
He contends that the new directive forces the same buyer to pay another 7.5 per cent, despite having already paid VAT on the primary product. "This is against logic. If VAT is a company tax, it may be assumed that NRS is taxing service providers, but VAT is a consumer tax," he emphasized, drawing a parallel to past controversies with Stamp Duty charges.
Potential Consequences for Digital Economy
Fasasi warned that the NRS policy could have severe negative repercussions. He believes it may push back the drive for financial inclusion, inhibit the Federal Government’s digital economy efforts, and ultimately increase the volume of cash circulating outside the formal banking system.
The implication, according to him, is that most Nigerians may resort to cash transactions to avoid the tax-prone electronic channels, undermining years of progress towards a cashless society.
NRS Clarifies: VAT is on Bank Charges, Not Customer Transactions
In a swift response, the Nigeria Revenue Service moved to clarify what it called "misleading narratives" circulating in the media. In a statement signed by Dare Adekanmbi, Special Adviser on Media to the NRS chairman, Zacch Adedeji, the service denied introducing any new tax.
The NRS asserted that VAT has always applied to fees, commissions, and charges for services rendered by banks and other financial institutions under Nigeria’s long-established VAT regime. The statement clarified that the Nigeria Tax Act did not introduce VAT on banking charges, nor did it impose any new tax obligation on customers.
"VAT applies only where banks charge fees or commissions for services such as transfers, USSD usage, card issuance and account maintenance," the NRS explained. The tax body urged the public and stakeholders to disregard misinformation and rely exclusively on official communications for accurate tax information.
The standoff highlights the ongoing tension between revenue generation efforts and policies designed to encourage digital financial participation, with the practical impact on everyday Nigerians yet to be fully seen.
