New 7.5% VAT on Bank Charges Kicks In: How Mobile Transfers and USSD Will Affect Nigerians

• Nigeria enforces 7.5% VAT on digital banking service fees, not on the principal amount transferred
• Small businesses and individuals may notice cumulative effects from slightly higher charges in daily transactions
• The government aims to broaden tax revenue through clearer application of the existing VAT on electronic banking services

The 7.5% Value Added Tax now applies to charges tied to electronic banking, including mobile app transfers and USSD sessions. This is not a brand-new tax rate.

Nigeria’s VAT has been 7.5 per cent since 2020. What has shifted is enforcement and clarity around how VAT is added to digital banking fees.

In simple terms, the money you send is not taxed. The small fee your bank or telecom operator charges for the service is what attracts VAT.

What gets VAT and what does not

Here is the key distinction Nigerians should know:

• Not taxed: The principal amount you transfer. Sending ₦10,000 costs ₦10,000.
• Taxed: The service charge or transfer fee. If your bank charges ₦10 for a transfer, VAT of 7.5 per cent applies to that ₦10.

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The same logic applies to USSD. If a USSD session costs ₦6.98, VAT is added to that fee, not to the money moved.

How it will show on your account

Banks are expected to display VAT as a separate line item or embed it clearly within the transaction charge. This means your alerts may show a slightly higher fee than before, often by just a few kobo.

For example:

• Transfer fee: ₦10
• VAT at 7.5 per cent: ₦0.75
• Total charge: ₦10.75

Over time, frequent users of transfers and USSD may notice the cumulative effect, especially small businesses and individuals who make many daily transactions.

Why the government is pushing this

The government aims to broaden the tax net without raising the VAT rate itself. Digital payments have grown rapidly, and authorities see banking and telecom services as a consistent revenue stream that is easier to track and collect.

Officials also argue that VAT is a consumption tax, meaning it applies when services are used, including digital financial services.

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Impact on everyday Nigerians

For most individuals, the immediate impact is modest. Fees increase slightly, not dramatically. However, the perception of being taxed on basic banking services has sparked frustration, particularly among low-income users who rely heavily on USSD because it works without internet access.

Small traders, dispatch riders, online vendors, and POS operators are likely to feel the change more because of the volume of transactions they process daily.

What banks and telcos are saying

Banks maintain that they are acting in line with existing tax laws and regulatory guidance. Telecom operators also insist that VAT on USSD fees is not new but is now being applied more consistently.

The Central Bank of Nigeria has previously clarified that VAT applies to eligible bank charges, not deposits or transfers themselves.

How Nigerians can reduce the impact

While VAT itself cannot be avoided legally, users can limit extra charges by:

• Making fewer, larger transfers instead of many small ones
• Using channels with lower service fees
• Tracking bank charges and switching to banks with cheaper transfer costs

Read also

Expert explains new 7.5% VAT on mobile, USSD bank transfers from January 19 and those most affected

Digital banking remains cheaper and safer than cash handling, even with VAT applied.

What to expect

The 7.5 per cent VAT on mobile transfers and USSD is about taxing service fees, not taxing your money.

While the added cost may feel annoying, especially in a tight economy, it is largely a matter of clearer enforcement rather than a sudden new levy.

For now, Nigerians should expect slightly higher transaction charges and more transparent breakdowns on bank alerts.

All bank fees you’ll now pay in 2026

Legit.ng earlier reported that as Nigeria’s financial landscape evolves, everyday bank users will see several new charges taking effect in 2026.

Beyond the standard fees many customers are already familiar with, recent policy changes mean new taxes on digital transactions and clearer responsibilities for existing levies.

Below is a breakdown of the key charges individuals and businesses should expect this year.

Proofreading by James Ojo, copy editor at Legit.ng.

Source: Legit.ng