…Nigerians Pay More as VAT on Bank Charges Takes Off Jan 19
By Yinka Giwa
The Federal Government is set to earn billions of naira daily from a newly activated 7.5 per cent Value Added Tax (VAT) on electronic banking services, following a directive to all financial institutions to begin immediate collection and remittance of the tax.
Under the new government-endorsed tax regime, which takes effect from Monday, January 19, 2026, VAT will now apply to a wide range of banking and digital payment services, including mobile app transfers, USSD transactions, Point-of-Sale (POS) charges, card issuance fees, POS activation fees, loan processing and documentation charges, among others.
Customers are being formally notified by their banks that the tax is not a price increase by financial institutions, but a statutory VAT to be collected on behalf of, and remitted to, the Nigerian Revenue Service (NRS), formerly the Federal Inland Revenue Service.
The notice clarified that VAT applies strictly to banking and service fees, not to interest earned on deposits or interest charged on loans, and that the tax will appear as a separate line item on customers’ transaction statements.
While the government has not released projected revenue figures, data from the Nigeria Inter-Bank Settlement System (NIBSS) and the Central Bank of Nigeria (CBN) point to a massive potential windfall.
In 2024, total electronic payment transactions in Nigeria were valued at an all-time high of N1.07 quadrillion, translating to an average of about N2.9 trillion in electronic transfers daily. In the first quarter of 2025 alone, the NIBSS Instant Payments (NIP) platform processed transactions worth N284.99 trillion, an average of approximately N3.16 trillion per day.
Internet and mobile app transfers account for the bulk of these transactions, with Point-of-Sale and USSD channels also contributing significantly. Mobile app transfers recorded over 3.49 billion transactions valued at more than N159 trillion in the first half of 2024, while USSD transactions in the same period were valued at N2.19 trillion.
Although VAT is charged on transaction fees rather than the transferred amounts, analysts estimate that the sheer volume of daily digital transactions means the Federal Government could be earning well over N2 billion every day from the 7.5 per cent VAT on banking service charges alone.
With tens of millions of electronic transactions processed daily across mobile apps, USSD, POS and online platforms, the new tax regime effectively turns routine banking activities into a major and steady revenue stream for the government.
However, the development has sparked concern among consumers and small businesses, who fear that the added tax burden will further increase the cost of everyday financial transactions in an economy already strained by inflation and declining purchasing power.
As banks begin full implementation this week, millions of Nigerians are expected to feel the impact immediately: one transfer, one USSD code and one POS payment at a time.