As Nigeria’s financial ecosystem braces for tighter tax compliance, confusion has erupted around Value Added Tax (VAT) on banking and fintech transactions. At the centre of the debate is whether customers are facing a new tax on electronic transfers—or merely a stricter enforcement of an old rule.
The Nigeria Revenue Service (NRS) has now stepped in to clarify the facts, stressing that no new VAT has been introduced on banking services. What is changing, according to the tax authority, is compliance, enforcement, and transparency across banks and fintech platforms.
The Trigger: Customer Notices from Banks and Fintechs
The controversy gained momentum after customers of major fintech platforms—led by Moniepoint—received notices informing them that, from January 19, 2026, a 7.5% VAT would apply to certain electronic banking charges.
Other fintech operators expected to align with the directive include Opay, PalmPay, and Kuda, alongside traditional deposit money banks.
The VAT on Bank Charges notices sparked public concern, with many customers interpreting the development as a fresh tax on transfers and USSD transactions.
NRS Responds: “This Is Not a New Tax”
The tax authority moved swiftly to counter what it described as misleading narratives.
Mr Dare Adekanmbi, Special Adviser on Media to the Executive Chairman of the Nigeria Revenue Service, Dr Zacch Adedeji, addressed the issue in a formal clarification issued in Abuja.
“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 Nigeria Tax Act did not introduce VAT on banking charges, nor did it impose any new tax obligation on customers in this regard.”
In essence, the NRS insists that the Nigeria Tax Act, 2025 did not create a new VAT on banking services. Instead, it reinforced existing obligations already embedded in Nigeria’s VAT framework.
What Exactly Attracts VAT—and What Does Not
To eliminate ambiguity, the NRS outlined clear boundaries around VAT applicability:
Services That Attract VAT (7.5%)
VAT applies only to service charges, not to the money being transferred. These include:
- Transfer fees
- USSD charges
- Card issuance fees
- Account maintenance fees
- Other banking or fintech service commissions
Illustration:
If a bank charges ₦10 as a transfer fee, VAT of ₦0.75 applies to the ₦10—not to the amount transferred.
Items Explicitly Exempt from VAT
According to the NRS:
- Principal amounts transferred or withdrawn → Not taxable
- Interest on savings, fixed deposits, and similar accounts → Not taxable
- Basic food items and essential goods → VAT-exempt
- Medical services and pharmaceutical products → VAT-exempt
- Tuition and core educational services → VAT-exempt
These exemptions, the NRS stressed, remain intact under the Nigeria Tax Act.
So, What Has Actually Changed?
According to the NRS, nothing has changed in the law—but everything is changing in enforcement.
“What has changed is compliance and enforcement, not the law.
Financial institutions are being reminded of their existing obligation to remit VAT already charged and collected from customers.”
This signals a more assertive tax administration posture, especially as Nigeria seeks to broaden its non-oil revenue base and reduce leakages in consumption taxes.
Why This Matters for Banks, Fintechs, and Customers
For banks and fintechs, the directive raises the bar on:
- Systems accuracy in VAT computation
- Clear customer communication
- Timely remittance to the NRS
For customers, the implication is subtler:
- No VAT on savings, balances, or transferred amounts
- Slight increases only on already-existing service fees
In short, the cost impact is marginal, but the compliance signal is significant.
BRANDECONOMY Insight
This episode underscores a recurring challenge in Nigeria’s fiscal reforms: policy communication. While the VAT regime itself is not new, weak public understanding and inconsistent industry messaging allowed misinformation to flourish.
For Nigeria’s fast-growing fintech sector—now a core pillar of financial inclusion—the lesson is clear: tax transparency is becoming as important as product innovation. As enforcement tightens, trust will hinge on how clearly institutions explain costs, charges, and regulatory mandates to users.
