A Nigerian man has provided crucial clarity on social media regarding the newly implemented 7.5% Value Added Tax on digital banking services, a change that is set to impact millions of users across the country.
Breaking Down the New VAT on Digital Transactions
In a detailed video posted on TikTok by user @semudaraabayomi, the man explained the mechanics of the tax, which officially took effect in January 2026. The clarification came after a prominent fintech company notified its customers about the impending VAT deductions. The new policy mandates that financial institutions collect and remit a 7.5% VAT on specific services to the Nigerian Revenue Service, formerly known as the Federal Inland Revenue Service.
The man emphasized a critical point that has caused confusion: the VAT is not deducted from the total amount sent in a transaction. Instead, it is applied as an additional levy on top of the existing service fee charged by banks or fintech platforms. This means customers will pay more for the same service.
How the VAT is Applied: A Practical Example
The same principle applies uniformly across mobile bank transfers, USSD transactions, and Point of Sale payments. The process involves two steps: first, the bank or agent deducts its standard service fee; second, a 7.5% VAT is calculated and added to that fee amount.
For instance, if a bank charges N50 as a transfer fee, the VAT would be N3.75 (which is 7.5% of N50). The total cost to the customer for that transaction would therefore become N53.75. The man stressed that this extra charge is a legal requirement and is remitted to the government, not retained by the financial service provider.
He also noted that certain services, such as interest on loans and advances, are exempt from this new VAT. His explanation highlighted the growing burden of charges on Nigerians who depend on digital platforms for their daily financial activities, a situation he described as increasingly frustrating for the average user.
Public Reaction and Wider Implications
The online explanation has sparked significant discussion among Nigerians, with many expressing concern over the cumulative effect of rising digital banking costs on small businesses and individual customers. The new tax regime is expected to heavily affect those who rely on mobile banking and USSD codes, particularly individuals without access to smartphones or conventional internet banking.
One commenter, Akinwunmi Olarenwaju, captured the prevailing sentiment by stating, "This still means we would pay more in charges." The concern is that this additional cost, however seemingly small per transaction, adds up for users who perform multiple transactions daily.
This development follows another recent financial policy update reported by Legit.ng, where banks were set to begin charging senders a N50 stamp duty, also known as the Electronic Money Transfer Levy, on electronic transfers of N10,000 and above starting January 1, 2026.
Together, these changes signal a shifting landscape for digital finance in Nigeria, where convenience is increasingly accompanied by a higher cost of access for the end-user.
