What the 7.5% VAT actually means for your wallet

For Nigerians, it’s hard to ignore the rumours about an additional 7.5% Value Added Tax (VAT) on banking transactions. It all started with an SMS from Moniepoint to customers on January 14th. 

“Update: New VAT on your banking fees. A 7.5% VAT will apply to some banking fees starting from January 19th, 2026, as required by the government. This is not a Moniepoint price increase. Learn more in your email.”

Many paused in confusion: Is this a new tax? Will transfers become more expensive overnight? Will this mean that every naira moving in or out of users’ accounts will be taxed? As the speculation continued, a follow-up email from Moniepoint was sent for some clarity. 

The email explained that the change was an upcoming, government-endorsed regulatory update related to Value Added Tax (VAT), and not a new charge introduced by the fintech itself. 

Moniepoint stressed that it was simply complying with a federal tax requirement, a point echoed across similar notices sent by other financial institutions. It mentioned that the VAT implementation will affect POS transaction fees, Mobile banking fees, USSD transaction fees, POS activation fees, Card Issuance fees, and Loan Processing & Documentation fees.

Still, for many Nigerians, the wording raised fresh concerns: if this wasn’t a Moniepoint decision, what exactly was the government changing, and how long had this VAT tax existed in the first place?

In this article, we tell you all that you need to know:

Read also: NRS says 7.5% VAT applies only to service charges on bank transfers

Question: Does a 7.5% VAT really exist?

Answer: Yes, it does, and it is not new.

VAT has existed for over 30 years. What has changed over time is how strictly and consistently it is applied, especially across digital and financial platforms. However, Moniepoint’s business hasn’t been actively deducting this tax, hence the announcement.

Value Added Tax (VAT) was first introduced in Nigeria in 1993 under the Value Added Tax Act, replacing the former sales tax system. The law was enacted to create a more efficient and broad-based way for the government to generate revenue by taxing the consumption of goods and services rather than income.

Initially set at 5%, the VAT rate remained unchanged for over two decades until February 2020, when the Nigerian government increased it to 7.5% through the Finance Act of 2019. This rate is what applies today.

According to the VAT Act, VAT is charged on the supply of taxable goods and services in Nigeria, with certain exemptions clearly listed in the law. Financial services are not taxed directly, but fees charged for providing those services are subject to VAT.

Question: Who pays the 7.5% VAT on transfers?

The short answer: the person who initiates the transfer.

According to Ilerioluwa Adebayo, an Associate Chartered Accountant and Finance Analyst at Aquantuo Nigeria Ltd, VAT on transfers is borne by the customer paying for the service.

“The person who transfers is the one paying the VAT because they are the consumer of the transfer service,” she explained.

Ilerioluwa Adebayo

This means VAT is not charged on the money sent, but on the service fee charged by the bank or fintech to process that transfer. If a platform charges ₦50 as a transfer fee, the 7.5% VAT is applied only to that ₦50, not the entire amount being transferred.

She further explained that this structure aligns with how VAT works globally: the service provider collects the tax, but the final burden rests on the customer using the service.

Question: Does this VAT affect my bank deposits and transfers?

Answer: No, it does not. At least not in the way that many Nigerians fear.

VAT is an indirect tax, meaning it is charged on value-added services, not on the money itself. Simply depositing money into your account or transferring funds from one account to another is not taxable.

According to the VAT law, VAT applies only to fees charged for providing a service, not to the principal amount of money involved.

This position is backed by Oluwaseyi Taiwo, an experienced financial professional, who explained:

“Value Added Tax is an indirect tax levied on value addition from one stage to another, with the final consumer being the person who bears the tax. At no point does VAT apply to deposits or the amount being transferred,” he said.

Oluwaseyi Taiwo

He clarified that VAT applies only to the fees charged by banks or service providers for facilitating transactions.

“VAT applies to the service of transfer or deposit, not the deposit or transfer itself. As such, only the fees charged by the bank or fintech are subject to VAT, and this VAT is paid by the consumer of that service.” Taiwo added.

In simple terms, if a bank charges you a processing or transfer fee, VAT is added to that fee. Not to your balance, not to your deposit, and not to the amount you are sending.

Final thoughts

The panic around the 7.5% VAT is understandable, especially in a country where new policies often come with little explanation. But this is not a new tax, nor is it a deduction from your deposits or transfers.

What Nigerians are seeing is a clearer enforcement of an existing VAT law that applies only to banking and fintech service fees, and not to the money itself. Understanding that difference is what separates speculation from reality and keeps your wallet concerns in check.

Read also: NESG outlook: 5 things startups should expect from Nigeria’s economy in 2026

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