VAT on Banking Services: Setting the Record Straight

In recent days, Nigerians have been inundated with reports suggesting that the Federal Government has introduced Value Added Tax (VAT) on banking services such as electronic transfers, fees and commissions. Understandably, this has triggered anxiety among citizens already grappling with economic pressures. However, the truth is far less dramatic than the headlines suggest.

Contrary to widespread claims, VAT on banking services is not new. It was not introduced by the Nigeria Tax Act, 2025, and it does not represent an additional financial burden on bank customers.
For decades, Nigeria’s VAT framework has applied to fees, commissions and charges for services rendered by banks and other financial institutions. What has changed is not the law, but enforcement.

The Nigeria Revenue Service (NRS) has been compelled to clarify this point following a wave of misinformation that blurred the line between service charges and actual funds transferred. VAT is not, and has never been, charged on the amount of money a customer transfers or withdraws. Rather, it applies strictly to the service fee imposed by the bank.
This distinction is critical.

When you make a bank transfer, whether ₦10,000 or ₦1 million, the amount sent to the recipient is not reduced by VAT. The full amount is applied as your principal. VAT is charged only on the bank’s service fee for processing the transaction, not on the money being transferred.

For example, on a ₦100,000 transfer, the bank may charge a ₦50 service fee, on which 7.5% VAT equals ₦3.75, in addition to a flat ₦50 stamp duty. Similarly, for USSD transactions, VAT applies only to the session fee. This shows that VAT is strictly a tax on service charges, not on customers’ funds.

Interest earned on savings accounts and fixed deposits also remains exempt, as it does not constitute a supply of goods or services under the law.

Equally important is what VAT does not cover. Basic food items, essential goods, medical and pharmaceutical products, as well as educational services, remain firmly exempt under the Nigeria Tax Act, 2025. These protections were deliberately preserved to shield ordinary Nigerians from unnecessary hardship.

So why the sudden public concern?
The answer lies in improved compliance and enforcement. Financial institutions are being reminded of their obligation to remit VAT already charged and collected. This renewed focus has created the false impression of a new tax, when in reality, it is the implementation of an existing one.
Tax reforms often attract controversy, especially in times of economic strain. Yet clarity must prevail over confusion. Spreading inaccurate information undermines public trust and distracts from the real conversation Nigeria must have about transparency, accountability and effective tax administration.

The Nigeria Revenue Service has made it clear that the Nigeria Tax Act, 2025, does not introduce any new VAT burden on ordinary citizens, particularly in sensitive areas such as savings, food, healthcare and education.

As Nigerians, we deserve honest explanations — not alarmist headlines. In a democracy, scrutiny is healthy, but it must be anchored on facts.

The task before us is not to fear taxation, but to demand that taxes already in place are administered fairly, communicated clearly, and used responsibly for national development. That is the conversation worth having.

Arabinrin Aderonke Atoyebi is the Technical Assistant on Broadcast Media to the Executive Chairman of the Nigeria Revenue Service