The social media and various news outlets have been buzzing with headlines suggesting that Nigerians will now face a 7.5% deduction on every bank transfer starting in January 2026. This has sparked widespread concern, with many fearing that a significant portion of their transferred funds would be automatically taxed by the government. However, the Federal Government, through the Nigerian Revenue Service (NRS), formerly known as the Federal Inland Revenue Service (FIRS), has introduced a policy that requires clarification to dispel misinformation.
The Truth Behind the 7.5% VAT Charge
Effective from Monday, January 19, 2026, financial institutions in Nigeria, including commercial banks, microfinance banks, and fintech platforms (such as Moniepoint, OPay, Kuda, and others), are required to collect and remit a 7.5% Value Added Tax (VAT) on specific electronic banking service fees. This is not a 7.5% tax on the principal amount you transfer (the actual money you’re sending). Instead, the VAT applies only to the service charges or fees imposed by the bank or fintech for processing the transaction.
Many initial headlines and viral posts created confusion by implying a direct deduction from the transferred amount, leading to panic. Multiple sources, including customer notices from banks and fintechs, emphasize that this is a statutory obligation to apply VAT to taxable digital services — similar to how VAT is charged on other goods and services like data plans or consumer products.
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What Exactly Is Taxed?
The 7.5% VAT will be added to fees for:
- Mobile banking transfers (e.g., app-based interbank transfers)
- USSD transactions (e.g., *901# or similar codes)
- Card issuance fees
- POS transaction fees (in some cases)
- Other electronic banking charges
Exemptions include:
- The principal transfer amount itself
- Interest earned on savings or deposit accounts
- Certain free services (e.g., most intra-bank transfers, which are often free and thus attract no VAT)
Real-Life Examples
Let’s break it down with simple calculations:Scenario 1: You transfer ₦50,000 via mobile app, and your bank charges a ₦25 NIP (interbank transfer) fee. VAT = 7.5% of ₦25 = ₦1.875
Total fee paid = ₦26.875
Amount received by recipient = ₦50,000 (unchanged)
Scenario 2: A USSD transfer costs ₦50 in fees. VAT = 7.5% of ₦50 = ₦3.75
Total deduction for fees + VAT = ₦53.75
Again, only the fee is affected — not your ₦100,000 or whatever principal you’re sending.
In both cases, the extra cost is minimal (a few naira), and the government is simply ensuring compliance with existing VAT laws on service fees in the digital economy.
This policy stems from a directive by the NRS to standardize VAT collection across all financial institutions, aiming to boost revenue from the growing digital financial sector without directly taxing citizens’ funds.
Why the Confusion and Clarifications Matter
Much of the online outrage stemmed from misinterpretations and sensational headlines. Some posts falsely claimed the tax would apply to the full transfer amount (e.g., 7.5% of ₦100,000 = ₦7,500 deducted), which is 100% false. Financial experts and bank notices have repeatedly stressed: “This is a tax on the bank’s commission, not your hard-earned wealth.”
The government and institutions like Moniepoint have issued statements assuring customers that VAT will be clearly itemized on transaction receipts and statements for transparency.
This update is part of broader efforts to align Nigeria’s digital financial services with standard tax rules, not a new “transfer tax” on citizens’ money. While any additional cost affects everyday banking, the impact remains small for most users, especially as many transfers (particularly intra-bank) remain free.
