What Nigeria’s New VAT Enforcement Means for Bank Customers

Nigerian bank customers are beginning to notice extra deductions on electronic transactions, sparking widespread debate over whether the Federal Government has introduced a new Value-Added Tax (VAT) on banking services. However, tax authorities insist that no new VAT has been created. Instead, banks are now enforcing an existing 7.5 per cent VAT on service charges, particularly on digital and electronic transactions. What Has Changed?From January 19, 2026, commercial banks and fintech platforms started applying 7.5% VAT on selected banking service fees—including charges on mobile transfers, USSD transactions, POS usage, and card-related services. This has led many customers to believe a new tax has been imposed. In reality, the tax applies only to the service fee charged by the bank, not to the amount of money transferred. For example: If a bank charges ₦100 for a transfer, VAT of ₦7.50 is added, Making the total charge ₦107.50. The transferred funds themselves remain VAT-free. Official Position: No New VATThe Nigeria Revenue Service (NRS)—formerly the Federal Inland Revenue Service (FIRS)—has clarified that the Nigeria Tax Act did not introduce a new VAT on banking transactions. According to the agency, VAT has always applied to services rendered by banks, including fees, commissions, and electronic service charges. What has changed is enforcement and visibility, as banks are now required to clearly itemise VAT deductions. Why Customers Are Feeling the ImpactSeveral factors are driving the public reaction: Increased reliance on digital banking has made VAT deductions more frequent and noticeable. Automatic VAT deductions now appear clearly on transaction alerts and bank statements. Previous inconsistencies in enforcement meant many customers were unaware VAT already applied to service charges. What Is Taxed—and What Is NotVAT applies to: Mobile and online transfer fees USSD banking charges POS service fees Card issuance and maintenance fees VAT does NOT apply to: The actual amount transferred or withdrawn Savings or fixed-deposit interest Loan principal amounts How This Affects Bank CustomersFor most Nigerians, the change means slightly higher transaction costs, particularly for frequent digital banking users. While each deduction may seem small, repeated transactions could add up over time—especially for individuals and small businesses that rely heavily on mobile and USSD banking. Banks are also expected to maintain transparent billing, showing VAT as a separate line item to ensure customers understand what they are being charged. Broader Tax Reform ContextThe VAT enforcement is part of Nigeria’s broader tax reform agenda aimed at: Expanding government revenue Improving compliance in the digital economy Reducing reliance on oil income It also comes alongside other statutory charges, such as stamp duty on qualifying transfers, which remains separate from VAT. The Bottom LineThere is no new VAT on bank transactions. Banks are now enforcing an existing 7.5% VAT on service charges. Customers will see higher transaction fees—but only on the charges, not on transferred funds. Transparency and clearer itemisation are key goals of the new enforcement approach. As Nigeria’s financial system becomes increasingly digital, customers are advised to review bank charges closely and consider transaction channels that minimise fees