Nigeria to Implement 7.5% VAT on Mobile and USSD Charges from Jan 19
Nigeria to Implement 7.5% VAT on Mobile and USSD
The Federal Government of Nigeria, through the Nigerian Revenue Service (NRS), has directed all financial institutions to commence the collection and remittance of a 7.5% Value Added Tax (VAT) on electronic banking service fees. Effective Monday, 19 January 2026, the tax will apply to charges incurred on mobile bank transfers, Unstructured Supplementary Service Data (USSD) transactions, and card issuance fees.
The directive, which aligns with the provisions of the Nigeria Tax Act 2025, mandates commercial banks, microfinance banks, and financial technology (fintech) operators to itemize and remit these charges. Leading fintech firms, including Moniepoint, OPay, and PalmPay, have begun issuing notices to customers to ensure compliance with the new regulatory framework.
Scope of the VAT Implementation
The 7.5% VAT is not a tax on the principal amount being transferred but rather a tax on the service fee charged by the financial institution. For instance, if a bank charges ₦25 for a mobile transfer, the 7.5% VAT will be applied to that ₦25 fee, resulting in an additional ₦1.88 deduction.
According to notices sent to customers by Moniepoint, the specific services affected include:
Mobile Banking Fees: Charges applied to electronic transfers via banking applications.
USSD Transaction Fees: Fees for services initiated through shortcodes (e.g., *712#).
Card Issuance: Administrative fees for the processing and delivery of debit or credit cards.
Financial institutions have clarified that interest on deposits and savings remains exempt from VAT.
Regulatory Context and Industry Reaction
This enforcement is part of a broader fiscal strategy to expand Nigeria’s non-oil revenue base. It follows the recent reclassification of the Electronic Money Transfer Levy (EMTL) as "Stamp Duty," which is now borne by the sender for transactions of ₦10,000 and above.
The National Association of Telecom Subscribers (NATCOMS) has expressed concern over the development. Speaking on the implementation, NATCOMS President Chief Deolu Ogunbanjo described the move as a form of multiple taxation. He noted that USSD sessions already attract a flat fee of ₦6.98, and the addition of 7.5% VAT on these and other banking charges places a further financial burden on consumers.
"We are saying no to the planned 7.5% VAT," Ogunbanjo stated, suggesting that the association may seek legal redress if the policy is not reviewed.
Impact on Digital Financial Services
The Nigerian financial sector has seen a significant shift toward digital payments, with transaction volumes hitting record highs in 2024 and 2025. While fintechs have historically leveraged low-cost or free transfers to drive financial inclusion, the mandatory collection of VAT on service fees may alter the cost-benefit analysis for low-income users who rely on USSD and mobile wallets.
Financial institutions are required to show the VAT deduction as a separate line item in transaction reports and account statements to ensure transparency and auditability by the NRS.
Outlook
As the 19 January deadline approaches, more financial service providers are expected to notify their customer bases. For policymakers, the success of this move will be measured by the increase in tax revenue versus its potential impact on the pace of digital adoption. Industry analysts suggest that while the individual deductions are small, the cumulative effect across millions of daily transactions will provide a significant boost to the federal treasury.
