Public concern around a 7.5% Value Added Tax (VAT) on banking and fintech services intensified after customers of Moniepoint received an SMS alert on January 14.
The message triggered widespread uncertainty, with many Nigerians asking:
- Is the government introducing a new banking tax?
- Will bank transfers suddenly cost more?
- Are deposits and withdrawals now subject to VAT?
As the discussion gained momentum online, Moniepoint sent a follow-up email to address the confusion.
Moniepoint Clarifies: No New Charges Introduced
In its clarification, Moniepoint stated that the VAT notification did not represent a new company-imposed fee. Instead, it explained that the update reflects compliance with an existing federal tax requirement.
The fintech outlined that VAT applies to specific service charges, such as:
- POS transaction charges
- Mobile and digital banking fees
- USSD transaction costs
- POS setup or activation fees
- Card issuance fees
- Loan processing and documentation charges
Similar notices from other banks and fintech companies confirmed that this was an industry-wide regulatory compliance issue, not an isolated policy change.
Is the Government Introducing a New VAT Rule?
In short, no.
VAT has been part of Nigeria’s tax framework for more than three decades. What Nigerians are experiencing now is stronger and more consistent enforcement, particularly within digital finance and fintech services.
Some platforms previously did not actively apply VAT to applicable service fees, which is why many customers are only becoming aware of it now.
How VAT Came to Exist in Nigeria
Nigeria introduced VAT in 1993 through the Value Added Tax Act, replacing the former sales tax system.
The objective was to broaden government revenue by taxing consumption of goods and services, rather than personal or corporate income.
Key developments include:
- 1993: VAT launched at 5%
- February 2020: Rate increased to 7.5% under the Finance Act 2019
- Today: 7.5% remains Nigeria’s official VAT rate
Are Bank Transfers and Deposits Taxed?
Not directly.
The VAT law clearly states that VAT applies to taxable services, not to money itself.
This means:
- Banking and financial services are not taxed outright
- Charges and fees for providing those services attract VAT
This distinction explains much of the current misunderstanding.
Who Bears the VAT Cost on Transfers?
According to Ilerioluwa Adebayo, an Associate Chartered Accountant and finance analyst at Aquantuo Nigeria Ltd, the VAT burden falls on the customer using the service.
“The person initiating the transfer pays the VAT because they are consuming the transfer service,” she explained.
She emphasised that VAT is an indirect tax, charged only on the service fee, not on the transferred funds.
Your Funds Are Not Being Taxed
This explanation is reinforced by Oluwaseyi Taiwo, who stressed that VAT never applies to deposited or transferred amounts.
“VAT is charged on value addition, with the final consumer bearing the cost,” he said.
“It does not apply to deposits or the money being moved, only to the charges imposed by banks or fintechs for carrying out transactions.”
Simply Put: How the 7.5% VAT Affects You
Here’s what Nigerians should know:
- VAT is not deducted from your savings or balance
- VAT does not apply to deposits
- VAT does not apply to the amount transferred
- VAT applies only to transaction or processing fees
For instance, if a bank charges ₦50 as a transfer fee, VAT is calculated on that ₦50, not on the total amount sent.
Conclusion: No New Tax, Just Better Enforcement
The anxiety surrounding the 7.5% VAT is understandable, especially given Nigeria’s history of limited policy communication.
However, this is neither a new tax nor a levy on your money.
What Nigerians are witnessing is the tighter enforcement of an existing VAT regulation that applies solely to banking and fintech service charges. Knowing this difference helps cut through the noise and ensures your financial decisions are based on facts, not fear.
