Federal Government Mandates 7.5% VAT on Bank Transfers and USSD Transactions

The Federal Government of Nigeria, through the Federal Inland Revenue Service (FIRS), has directed that a 7.5% Value Added Tax (VAT) will be charged on all mobile bank transfers and USSD transactions effective from Monday, January 19, 2026. According to a circular issued to all financial institutions, the tax is a mandatory implementation of the Finance Act, aimed at boosting domestic revenue mobilization. This directive ends any prior exemptions on electronic money transfer services and positions digital financial activities as a key taxable component of the economy.

The FIRS clarified that the VAT is not a levy on the total amount of money being transferred by the customer, but rather a 7.5% charge on the "convenience fees" or "service charges" applied by banks and telecommunications companies. For example, if a bank charges a standard fee of ₦26.88 for a transfer, a VAT of approximately ₦2.02 will be added, bringing the total service cost to the customer to ₦28.90. Similarly, the ₦6.98 flat fee currently paid by Nigerians for USSD banking services will now attract a VAT of ₦0.52, bringing the total cost per session to ₦7.50.

Financial institutions have already begun notifying customers of this change via email and SMS, emphasizing that the deductions are not bank-led but a statutory federal requirement. This move mirrors the 2024 implementation where the Federal Government introduced a ₦50 Electronic Money Transfer Levy (EMTL) on inflows of ₦10,000 and above. The reintroduction of VAT on these service fees is expected to generate billions in monthly revenue for the government, despite concerns from financial experts that the increased cost of digital transactions may hinder the nation’s financial inclusion goals.

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